By Dylan Tailor
Last week, the US Dollar maintained its dominance as resilient economic data and escalating trade tensions reinforced its status as the global safe haven. Sterling appreciated slightly against a struggling Euro, which faced a “tariff premium” following headlines regarding potential 10%–25% US tax on European goods. Conversely, the Pound weakened against the Dollar as a “risk-off” mood and stronger-than-expected American data, specifically low jobless claims and rising producer prices which led markets to scale back expectations for Federal Reserve rate cuts. This also forced the Euro lower against the US dollar, as cooling German inflation contrasted sharply with a US economy that remains too robust for immediate policy easing.
The market also contended with significant political friction following reports of potential legal action against Fed Chair Jerome Powell, an unprecedented challenge to central bank independence that briefly softened the Dollar as traders questioned long-term US monetary stability. However, this was largely overshadowed by aggressive trade rhetoric and geopolitical instability in the Middle East, which supported the Dollar’s safe-haven appeal and pushed the Iranian rial to record lows. Furthermore, elevated US bond yields continued to attract global capital, pulling investment away from Gold and causing the precious metal to settle just below $4,600 per ounce.
Looking ahead, attention shifts to critical data that will dictate global interest rate paths for early 2026. The UK faces a volatile window with labour and inflation reports due Tuesday and Wednesday, where high figures could support Sterling by delaying Bank of England rate cuts. Euro volatility is also expected on Wednesday morning as ECB President Christine Lagarde speaks at the World Economic Forum. Her comments on inflation and the pace of future cuts will be vital for the EUR/USD and GBP/EUR pairs. Finally, US GDP and Core PCE inflation data will serve as the ultimate test for the Dollar’s recent rally. Given this expected volatility, we recommend contacting your dedicated account manager to discuss hedging strategies and secure your currency against sharp market movements throughout the week.
Tuesday, January 20
- GB: Unemployment Rate & Average Earnings
- EA: ZEW Economic Sentiment Index
Wednesday, January 21
- GB: Inflation Rate YoY
- EA: ECB President Lagarde Speech
- US: Pending Home Sales
Thursday, January 22
- EA: ECB Monetary Policy Meeting Accounts
- US: GDP Growth Rate Final
- US: Core PCE Price Index
- US: Initial Jobless Claims
Friday, January 23
- EA/GB/US: S&P Global / HCOB Flash PMI Data
GB: Retail Sales