The dollar hovered near multi-week lows against both the euro and the Japanese yen on Tuesday, as investors awaited the release of US economic data later in the session that could influence expectations for the Federal Reserve’s monetary policy path.

Attention this week is focused on central bank decisions, with the European Central Bank and the Bank of England holding policy meetings on Thursday, while the Bank of Japan is set to announce its monetary policy decision on Friday.

Euro supported by mixed data and a longer tightening bias

Economic data from the euro area were mixed but supported the European Central Bank’s stance of keeping interest rates higher for longer, lending support to the euro. German investor sentiment rose more than expected in December, while euro zone business activity growth slowed toward the end of 2025.

However, the ECB’s lack of any explicit pushback against market bets on interest rate hikes in late 2026 or early 2027 may be interpreted as tacit approval, leaving room for a hawkish surprise at this week’s policy meeting.

The euro rose by 0.05% to $1.1758, after touching $1.1769 on Monday, its highest level since September 24.

Ukraine peace talks under scrutiny

Ukraine peace talks remain in focus after Swedish Prime Minister Ulf Kristersson said tangible progress had been made on security guarantees during talks in Berlin on Monday, although investors remain cautious about the prospects of a lasting agreement.

Bank of Japan decision awaited as rate hike is priced in

A rate hike by the Bank of Japan is largely priced in by markets, but any signal pointing to further tightening ahead of spring wage negotiations would mark a shift toward a more hawkish stance.

Confidence among large Japanese manufacturers reached its highest level in four years in the three months through December, supporting expectations of additional monetary tightening. Still, analysts said the policy update may not be sufficient to support the yen amid concerns linked to fiscal pressures.

The Japanese government is planning additional tax breaks to stimulate investment, despite market concerns over rising public debt levels.

The dollar fell by 0.25% to ¥154.85 ahead of the Bank of Japan decision, while renewed volatility prompted investors to seek safe havens. The dollar had touched ¥154.34 in early December, its lowest level since November 14.

Morgan Stanley said it maintains a neutral stance on the dollar/yen pair but sees downside risks if US labor market data continue to deteriorate.

US data fog begins to lift

Interest rate futures show markets pricing a 75.6% probability that the Federal Reserve will keep interest rates unchanged at its next meeting on January 28, unchanged from the previous day, according to the CME FedWatch tool.

Stefan Koopman, senior macro strategist at Rabobank, said: “Market consensus expects November job growth to come in slightly below trend by around 50,000 jobs, with the unemployment rate between 4.4% and 4.5%, a reading that would ease concerns about the labor market while keeping the option of rate cuts alive.”

He added: “A weaker reading could trigger risk-off moves, with equities falling, the dollar weakening, and flows moving toward cash and US Treasuries.”

The dollar index, which measures the US currency against a basket of six major currencies, traded at 98.20 points, slightly lower after earlier nearing its weakest level since October 17.

Analysts were divided, with some arguing that the data would help clarify employment trends during the US government shutdown period, while others doubted they would fully remove uncertainty.

Chinese yuan hits a 14-month high

The offshore Chinese yuan rose by 0.1% to 7.0371 per dollar, its strongest level since October 3, 2024.

Chris Turner, head of global markets at ING, said: “The People’s Bank of China will not rush to accept a sharp appreciation of the renminbi, but pressures could build in 2026, especially if our expectations for two additional Federal Reserve rate cuts prove correct and the dollar weakens modestly.”

The Australian dollar was little changed at $0.6638, after a private survey showed consumer confidence slipping in December.

Silver prices declined in the European market on Tuesday, retreating from the all-time highs recorded at the end of last week, amid active correction and profit-taking operations. Further losses were limited by the continued weakness of the US dollar against a basket of major global currencies.

Markets are awaiting the release of key US labor market data later today, particularly the October jobs report, which had been delayed due to the US government shutdown. The data are expected to provide strong signals about the Federal Reserve’s monetary policy path in 2026.

Price Overview

• Silver prices today: Silver fell by 3.0% to $62.17, from an opening level of $64.09, after recording an intraday high of $64.15.

• At Monday’s settlement, silver prices rose by 3.5%, resuming gains that had paused on Friday after reaching an all-time high of $64.66 per ounce.

US Dollar

The US dollar index slipped by around 0.1% on Tuesday, extending losses for a second consecutive session and nearing its lowest level in two months, reflecting continued weakness in the US currency against a basket of global currencies.

The dollar has remained under negative pressure since last week’s Federal Reserve meeting, as the outcome was less hawkish than markets had expected, reviving bets on the continuation of the Fed’s interest rate cutting cycle in 2026.

US Interest Rates

• According to the CME FedWatch Tool, pricing for keeping US interest rates unchanged at the January 2026 meeting currently stands at 73%, while the probability of a 25-basis-point rate cut is priced at 27%.

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

• To reassess these expectations, investors are closely monitoring further US economic data, in addition to comments from Federal Reserve officials.

• The US October jobs report is due later today and is expected to provide strong clues about the pace of growth in the world’s largest economy during the fourth quarter, which was heavily impacted by the longest government shutdown in US history.

Silver Outlook

At Economies.com, we expect that if US data come in less aggressive than market expectations, the likelihood of an earlier US interest rate cut in 2026 will increase, providing further positive momentum for non-yielding assets, led by precious metals such as gold and silver.

Gold prices fell in the European market on Tuesday for the first time in six days, pulling back from their highest levels in two months amid active correction and profit-taking operations, while losses were capped by the continued weakness of the US dollar against a basket of global currencies.

Markets are awaiting later today the release of key US labor market data, especially the October jobs report, which was previously delayed due to the US government shutdown. The report is expected to provide strong signals about the future path of Federal Reserve monetary policy in 2026.

Price Overview

• Gold prices today: Gold declined by about 0.8% to $4,271.67, from an opening level of $4,305.35, after recording a session high of $4,317.90.

• At Monday’s settlement, gold prices rose by 0.15%, marking a fifth consecutive daily gain, and had earlier reached a two-month high at $4,353.59 per ounce during Friday’s trading.

The US Dollar

The US Dollar Index fell by 0.1% on Tuesday, extending its losses for the second consecutive session and nearing a two-month low, reflecting continued weakness in the US currency against a basket of global currencies.

The dollar has remained under pressure since last week’s Federal Reserve meeting, as the outcome was less hawkish than markets had anticipated, reviving bets on the continuation of the federal rate-cut cycle in 2026.

US Interest Rates

• According to the CME FedWatch Tool, pricing for keeping US interest rates unchanged at the January 2026 meeting currently stands at 73%, while the probability of a 25-basis-point rate cut is priced at 27%.

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

• To reassess these expectations, investors are closely monitoring upcoming US economic data, along with comments from Federal Reserve officials.

• The October US jobs report is due later today, and is expected to offer strong clues about the pace of growth in the world’s largest economy during the fourth quarter, which was heavily affected by the longest government shutdown in US history.

Gold Outlook

Tim Waterer, Chief Market Analyst at KCM Trade, said that the US dollar remains weak, which helps keep gold prices in an upward bias, as markets believe the Federal Reserve may be underestimating the number of potential rate cuts next year.

Waterer added that if labor market data confirms that employment remains a weak spot, gold could benefit, as this would strengthen the case for an early rate cut in 2026.

SPDR Gold Trust

Gold holdings at SPDR Gold Trust, the world’s largest gold-backed ETF, fell by 1.43 metric tons on Monday, bringing total holdings down to 1,051.69 metric tons, retreating from 1,053.12 metric tons, which was the highest level since October 20.

The British pound fell in European trading on Tuesday against a basket of global currencies, pulling back from a two-month high against the US dollar, amid relatively active correction and profit-taking, alongside investor reluctance to build new long positions ahead of key UK economic data.

These data are expected to play a decisive role in shaping the Bank of England’s policy decision later this week, with current expectations pointing to a 25-basis-point cut in UK interest rates to a 3.75% range, the lowest level since December 2022, marking the fourth monetary easing step this year.

Price Overview

British pound price today: The pound slipped more than 0.1% against the dollar to $1.3362, from an opening level of $1.3377, after recording an intraday high of $1.3384.

On Monday, the pound posted gains of less than 0.1% against the dollar, resuming its upward move that had paused on Friday due to correction and profit-taking from a two-month high at $1.3438.

UK Interest Rates

Market pricing for a 25-basis-point rate cut by the Bank of England at this week’s meeting remains steady above 90%.

The Bank of England meets on Thursday to discuss appropriate monetary policy in light of recent economic developments in the UK, particularly as concerns over financial stability have eased following the announcement of a relatively moderate autumn budget.

Voting results from the Bank of England’s November meeting, when rates were held unchanged, showed a growing inclination among policymakers toward delivering a fourth easing move this year.

Updated policy guidance and comments from the Bank of England governor are expected to provide strong signals regarding the path of UK interest rates in 2026.

Key Data

To reassess the above expectations, investors are closely watching the release of highly important UK economic data throughout the day, including labor market indicators, alongside other readings covering the performance of key sectors of the economy.

Outlook for the British Pound

At Economies.com, we expect that if UK data come in less hawkish than markets anticipate, expectations for a UK rate cut this week will increase further, adding more downside pressure on the British pound against a basket of global currencies.