The dollar index hovered around 98.4 on Friday, poised to finish the week largely unchanged as investors weighed the prospects for further Federal Reserve rate cuts next year amid soft inflation and labor market signals. November’s CPI report showed headline inflation at 2.7%, the lowest since July and below market expectations of 3.1%, while core inflation eased to 2.6%, the slowest pace since early 2021. Meanwhile, data earlier this week indicated that the unemployment rate rose to 4.6% in November, the highest level since 2021. The combination of subdued inflation and signs of a cooling labor market provides the Fed with greater flexibility to reduce rates in 2026, although markets expect policy to remain on hold in January. Meanwhile, Trump said he will soon announce the next Fed chair, who he expects will implement substantial rate cuts, with economic adviser Hassett, former Fed Governor Warsh, and current Fed Governor Waller all viewed by markets as potential frontrunners.