Oil prices fell on Wednesday after US President Donald Trump announced that the United States had reached an agreement to import up to $2 billion worth of Venezuelan crude oil, a move expected to increase supplies for the world’s largest oil consumer.

Brent crude futures slipped 11 cents to $60.59 a barrel by 11:04 GMT, while US West Texas Intermediate crude futures fell 27 cents to $56.86 a barrel.

Both benchmarks extended losses of more than $1 from the previous trading session, as market participants continued to expect ample global supplies during the year.

Two sources familiar with the matter told Reuters that the deal between Washington and Caracas could initially require rerouting cargoes that had been destined for China. Venezuela holds millions of barrels of oil loaded on tankers and in storage tanks, but has been unable to ship them since mid-December due to the blockade imposed by Trump on Venezuelan oil exports.

That blockade was part of a US pressure campaign against the government of Venezuelan President Nicolas Maduro, which culminated in his arrest by US forces over the weekend. Senior Venezuelan officials described Maduro’s arrest as a “kidnapping operation” and accused the United States of attempting to seize the country’s vast oil reserves.

In a social media post on Tuesday, Trump said Venezuela would “deliver” between 30 million and 50 million barrels of “sanctioned oil” to the United States.

Giovanni Staunovo, an analyst at UBS, said: “Trump’s post about Venezuelan oil imports put downward pressure on crude prices earlier today, but market participants now appear to believe the volumes could be smaller, which helped prices pare earlier losses.”

Morgan Stanley analysts estimate that the oil market could see a surplus of up to 3 million barrels per day in the first half of 2026, citing weak demand growth last year and rising supplies from OPEC producers and non-OPEC countries.

However, analysts at BMI, a unit of Fitch Solutions, said in a note on Wednesday that the prospect of increased exports of low-cost Venezuelan oil could slow the expansion of production capacity in the United States and other regions.

Venezuela sells its main Merey crude grade at a discount of around $22 a barrel to Brent prices, for delivery at its ports.

“This raises medium-term oil price expectations, particularly if the Venezuelan regime remains in place,” BMI analysts said.

The dollar moved within narrow ranges on Wednesday, ahead of a series of US economic data releases that could shape Federal Reserve interest rate expectations, a factor traders view as more influential for currency markets than ongoing geopolitical tensions.

Markets largely ignored the deepening geopolitical divisions around the world, as equities continued to rise, while currencies and bonds showed little reaction following the US intervention in Venezuela and the arrest of President Nicolas Maduro.

Markets entered a wait-and-see mode ahead of a batch of US labor market data, including private-sector employment figures and job openings, due later in the day, ahead of the closely watched nonfarm payrolls report on Friday.

Ahead of the data, the dollar index edged slightly higher to 98.63 points.

Thierry Wizman, global foreign exchange and interest rate strategist at Macquarie Group, said:

“Traders seem comfortable with the rhetoric coming out of the United States as long as it does not imply the need for a direct military presence on the ground to govern Venezuela.”

He added: “A military invasion and a prolonged ground conflict could have triggered a sharp sell-off in the dollar, as seen during the Iraq and Afghanistan wars between 2002 and 2008.”

Investors are struggling to form a clear picture of the performance of the world’s largest economy following a record US government shutdown last year, which disrupted the collection and publication of key economic data.

Even so, investors remain convinced that the Federal Reserve will cut interest rates twice more during the current year. This expectation has weighed on the dollar, while growing divisions within the Fed and the approaching announcement by US President Donald Trump of his next nominee to chair the central bank have further complicated the outlook for US monetary policy.

The euro slipped slightly after declining the previous day, following a sharper-than-expected slowdown in German inflation in December, prompting traders to modestly scale back bets on an interest rate hike in early 2027.

Markets have priced in unchanged interest rates until 2026 since last summer, with expectations for policy tightening by the European Central Bank in 2027 as inflationary pressures rise due to German fiscal stimulus.

The single currency fell 0.10% to $1.1676, after dropping 0.28% on Tuesday.

In another development being monitored by traders, China on Tuesday banned exports of dual-use materials to Japan that could be used for military purposes, in the latest move by Beijing in response to remarks made by Japanese Prime Minister Sanae Takaichi in early November regarding Taiwan. Strategists said the move had little impact on foreign exchange markets.

The US dollar slipped 0.10% against the Japanese yen to 156.51.

The Australian dollar reached its highest level since October 2024 at $0.6766, after a mixed inflation report kept hopes of a near-term interest rate hike in check. The New Zealand dollar traded at $0.5783.

Jose Torres, chief economist at Interactive Brokers, commented on Wednesday’s data by saying: “The ADP monthly employment report will be the most influential, as a rise in the unemployment rate represents one of the key risks in the new year, alongside the possibility that massive investments in artificial intelligence fail to deliver outsized returns.”

Gold prices fell in European trading on Wednesday for the first time in four sessions, giving up the one-week high recorded earlier in Asian trade, amid renewed correction and profit-taking activity, and under pressure from a stronger US dollar.

A series of key US economic data releases are due later today, which are expected to provide strong clues on the future path of Federal Reserve monetary policy and US interest rates.

Price overview

• Gold prices today: Gold fell by 1.2% to $4,441.67, from an opening level of $4,494.79, after touching a session high of $4,500.45, the highest level in a week.

• At Tuesday’s settlement, the precious metal gained 1.05%, marking a third consecutive daily advance, supported by rising geopolitical tensions following the US strike in Venezuela.

US dollar

The US dollar index rose by 0.1% on Wednesday, extending gains for a second straight session and approaching a four-week high, reflecting continued strength of the US currency against a basket of major and minor currencies.

This advance comes as investors increasingly favor the dollar as one of the most attractive alternative investment assets amid elevated global geopolitical risks, and as one of the best available investment opportunities, particularly in light of a stream of weak economic data from Europe and China.

US interest rates

• Stephen Miran, a Federal Reserve governor whose term ends later this month, said on Tuesday that a sharp cut in US interest rates is needed to sustain economic growth.

• Minneapolis Federal Reserve President Neel Kashkari, a voting member of the rate-setting committee this year, said he sees a risk of a sharp rise in the unemployment rate.

• According to the CME FedWatch tool, markets are currently pricing an 84% probability that US interest rates will remain unchanged at the January 2026 meeting, versus a 16% probability of a 25-basis-point rate cut.

• Investors are currently pricing in two US rate cuts over the course of next year, while Federal Reserve projections point to just one 25-basis-point cut.

• To reassess these expectations, investors are closely watching a series of key US economic releases, including private sector employment data, job openings figures, and services sector activity.

Gold outlook

Capital.com analyst Kyle Rodda said prices are “not being driven heavily by fundamentals, as there is a lot of speculation,” noting that price action has largely been upward but remains characterized by two-way volatility. He added that the US dollar is also playing a role in pressuring prices.

SPDR Gold Trust

Gold holdings at SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose by around two metric tons on Tuesday, lifting total holdings to 1,067.13 metric tons.

The euro edged slightly higher in the European market on Wednesday against a basket of global currencies, trading within a narrow range against the US dollar, as investors refrained from building new positions ahead of the release of key inflation data in Europe and very important economic data from the United States.

Despite easing price pressures in Germany during December, markets continue to rule out any retreat by the European Central Bank from current interest rate levels this year, supported by the resilience of economic activity in the euro area, which has recently delivered performance exceeding expectations.

Price overview

• Euro exchange rate today: The euro rose by around 0.15% against the dollar to 1.1703, from the day’s opening level of 1.1688, after recording a low of 1.1684.

• The euro ended Tuesday’s trading down about 0.3% against the dollar, resuming losses that had paused the previous day during a recovery from a four-week low at 1.1659.

• These losses were attributed to data showing a sharper-than-expected slowdown in inflation in Germany and France, which eased inflationary pressure on policymakers at the European Central Bank.

US dollar

The US dollar index fell by 0.1% on Wednesday, reflecting a decline in the US currency against a basket of major and secondary currencies, as investors avoided opening new long positions ahead of key economic data from the United States.

Later today, a series of US data releases are due, including private sector employment figures for December, job openings at the end of November, and the Institute for Supply Management’s survey on services sector activity in December.

These data are expected to provide further evidence on the likelihood of the Federal Reserve continuing to cut US interest rates over the course of this year.

European interest rates

• Money markets continue to price the probability of a 25 basis point cut in European interest rates in February at below 10%.

• Traders expect the European Central Bank to keep interest rates unchanged throughout this year, especially if inflation remains close to its 2% target.

Inflation in Europe

To reassess the above expectations, investors are awaiting the release later today of headline inflation data for Europe for December, which will clarify the extent of inflationary pressures facing policymakers at the European Central Bank.

By 10:00 GMT, the annual consumer price index for Europe is due. Market expectations point to a rise of 2.0% in December, down from 2.1% in November, while core inflation is expected to remain at 2.4%, in line with the previous reading.

Euro outlook

Here at Economies.com, we expect that if inflation data come in cooler than currently anticipated by markets, the likelihood of European interest rate cuts this year will increase, which would imply renewed downward pressure on the euro’s exchange rate in the foreign exchange market.