The US dollar began its first full trading week of 2026 by climbing to multi-week highs against a range of currencies, following a weak performance in December, as attention turns to a slate of key US economic data due later this week.

Traders were also closely watching developments in Venezuela, following a US raid and the arrest of President Nicolás Maduro.

US President Donald Trump told reporters on Sunday that he could order another strike if US efforts to open Venezuela’s oil sector and halt drug trafficking fail. He also hinted at possible military action against Colombia and Mexico.

Against a tense geopolitical backdrop, the dollar posted modest gains. However, analysts said it is still too early to conclude that the move is sustainable. The US monthly jobs report, due on Friday, is seen as a decisive factor in shaping monetary policy expectations — and as having a greater influence on the dollar than geopolitical developments.

Macroeconomics outweigh geopolitics for now

The dollar index rose for a fifth consecutive session, gaining 0.25% to reach its highest level since December 10, driven mainly by euro weakness. The euro fell 0.31% to $1.16845, its lowest level since the same date. The dollar index had declined 1.2% in December, marking its weakest monthly performance since August.

Jeremy Stretch, head of G10 FX strategy at CIBC Markets, said: “While we do see this geopolitical risk, I don’t think we should get stuck on it. We’ll very quickly get back to macro reality, because there’s a torrent of US data through the course of this week.”

He added: “Often, the first move in FX following a big event is the wrong one. I’m not saying it’s wrong here, but I do think this dollar strength could be vulnerable to correction if we see signs of fragility in the employment data.”

Stretch noted that a recent run of strong US economic releases has pushed markets to consider a slower pace of interest rate cuts this year.

This week’s data releases begin with the Institute for Supply Management manufacturing survey on Monday and conclude with the monthly nonfarm payrolls report on Friday.

Kyle Rodda, senior financial markets analyst at Capital.com, said: “I would argue that FX markets are not really pricing in the risks from Venezuela so much as what the US data will reveal about the Federal Reserve’s policy path.”

Traders are currently pricing in two US interest rate cuts this year, according to calculations by LSEG based on futures pricing.

US rate cuts still in focus

Investors are also awaiting Trump’s pick for the next Federal Reserve chair, with Jerome Powell’s term set to expire in May. Trump has said he will announce his choice this month, indicating the successor would be “someone who believes in lower interest rates… by a lot.”

In Japan, Bank of Japan Governor Kazuo Ueda said on Monday that the central bank would continue raising interest rates if economic conditions and price developments evolve in line with its forecasts. He has repeated this stance several times in recent months, including after December’s widely expected rate hike to the highest level in three decades.

The dollar was steady against the Japanese yen at 156.81, rose 0.34% against the Swiss franc to 0.795, and gained around 0.2% against both the Australian and New Zealand dollars.

Gold prices rose nearly 2.5% in European trading on Monday, extending gains for a second consecutive session, supported by strong demand for safe-haven assets after the United States carried out a complex military strike in Venezuela and arrested President Nicolás Maduro over the weekend.

The advance came despite a strong rise in the US dollar against a basket of major global currencies, ahead of the release of a highly important set of US economic data that is expected to provide strong clues on the Federal Reserve’s interest rate path this year.

Price Overview

• Gold prices today: Gold prices rose by around 2.5% to $4,434.50, from an opening level of $4,332.32, and recorded a low at $4,332.32.

• At Friday’s settlement, the precious metal gained 0.3%, marking its second advance in the past three sessions, as part of a rebound from a two-week low.

The US strike in Venezuela

US forces carried out a large-scale military operation early on Saturday, during which they arrested Venezuelan President Nicolás Maduro and his wife, Cilia Flores, and airlifted them to New York to face charges related to drug trafficking and terrorism.

Reports said the US strike resulted in civilian casualties. In the aftermath, Vice President Delcy Rodríguez announced she had assumed the presidency on an interim basis, while stressing that Maduro remains the country’s legitimate president.

The US dollar

The US dollar index rose by 0.25% on Monday, extending gains for a fourth consecutive session and reaching a four-week high of 98.49 points, reflecting continued strength in the US currency against a basket of global currencies.

The move comes as investors focus on a crucial set of US macroeconomic indicators due later this week, which are widely seen as key to shaping expectations for US monetary policy this year.

Minutes from the Federal Reserve’s December meeting showed a tendency among US policymakers to proceed cautiously in upcoming meetings, with some participants favoring keeping interest rates unchanged “for some time” following December’s rate cut.

US interest rates

• Anna Paulson, President of the Federal Reserve Bank of Philadelphia, said on Saturday that further rate cuts by central banks may take time after the aggressive easing cycle seen last year.

• According to the CME FedWatch tool from CME Group, markets currently price an 83% probability that US interest rates will remain unchanged at the January 2026 meeting, and a 17% probability of a 25 basis point rate cut.

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

• To reassess these expectations, investors are later today awaiting the release of Institute for Supply Management data on US manufacturing activity for December.

Gold outlook

Tim Waterer, chief market analyst at KCM Trade, said events in Venezuela have revived safe-haven demand, with gold and silver among the main beneficiaries, as investors seek protection against geopolitical risks.

SPDR Gold Trust

Gold holdings at the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell by around 5.43 metric tons on Friday, bringing total holdings down to 1,065.13 metric tons, the lowest level since December 22.

The euro fell in European trading on Monday against a basket of global currencies, deepening its losses for a fourth consecutive session against the US dollar and hitting a four-week low, marking a negative start to the week. The move comes as investors continue to favor the US currency, amid weak expectations that the Federal Reserve will cut interest rates at its January meeting.

At the same time, expectations for a European Central Bank rate cut in February have declined, particularly given the recent improvement in economic activity across the euro area, alongside expectations that this improvement will continue as downside risks fade.

Price Overview

• Euro exchange rate today: The euro fell 0.4% against the dollar to $1.1672, the lowest level since December 10, from an opening price of $1.1720, after touching a session high of $1.1721.

• The euro ended Friday’s session down by around 0.2% against the dollar, marking its third consecutive daily loss.

US Dollar

The US dollar index rose 0.25% on Monday, extending its gains for a fourth straight session and reaching a four-week high of 98.49 points, reflecting continued strength in the US currency against a basket of global currencies.

Currency traders largely ignored political developments in Venezuela over the weekend, including the US military operation and the arrest of Venezuelan President Nicolás Maduro.

Market participants are instead focusing on a key set of US macroeconomic indicators due later this week, which are expected to provide important clues about the path of Federal Reserve monetary policy this year.

The minutes of the Federal Reserve’s December meeting showed a tendency among US policymakers to adopt a more cautious stance in upcoming meetings, with some participants suggesting that keeping interest rates unchanged “for some time” after the December cut could be the most appropriate option.

According to the CME FedWatch Tool, market pricing for the probability that US interest rates will remain unchanged at the January meeting is currently steady at 83%, while the probability of a 25-basis-point rate cut stands at 17%.

European Interest Rates

• Money market pricing for the probability of a 25-basis-point rate cut by the European Central Bank in February remains below 10%.

• To reassess these expectations, investors are awaiting further economic data from the euro area, particularly on inflation, unemployment, and wage growth.

Interest Rate Differential

Following the Federal Reserve’s latest decision, the interest rate gap between Europe and the United States has narrowed to 160 basis points in favor of US rates, the smallest gap since May 2022, which supports a stronger euro-dollar exchange rate over the medium term.

The Japanese yen declined in Asian trading on Monday at the start of the week against a basket of major and minor currencies, hitting a two-week low versus the US dollar, as demand for the US currency remained strong and investors largely ignored the US operation in Venezuela over the weekend.

With the majority of Bank of Japan board members leaning toward continuing interest-rate hikes through 2026, global markets are closely watching for clearer evidence on the future path of Japan’s monetary policy normalization.

Price Overview

• Japanese yen exchange rate today: The dollar rose 0.3% against the yen to ¥157.30, the highest level since December 22, from an opening level of ¥156.81, while the session low was ¥156.68.

• The yen ended Friday’s session up by less than 0.1% against the dollar, marking its first gain in three sessions, amid thin trading due to a Japanese market holiday.

US Dollar

The US dollar index rose 0.25% on Monday, extending its gains for a fourth consecutive session and reaching a four-week high of 98.49 points, reflecting continued strength in the US currency against a basket of global currencies.

Currency traders largely overlooked political developments in Venezuela over the weekend, including the US military operation and the arrest of Venezuelan President Nicolás Maduro.

Market participants are instead focusing on a critical set of US macroeconomic indicators due later this week, which are expected to provide important signals on the direction of Federal Reserve monetary policy this year.

Japanese Interest Rates

• Last week in Tokyo, the summary of opinions from the Bank of Japan’s most recent monetary policy meeting—held on December 18 and 19—was released, showing that the central bank raised its policy rate to 0.75%, the highest level since 1995.

• The summary revealed a clear hawkish shift among most board members, with many highlighting the need for further rate hikes in the future. Members agreed that gradually raising interest rates and scaling back monetary stimulus are necessary to ensure long-term price stability.

• Market pricing for the probability of a quarter-percentage-point rate hike by the Bank of Japan at its January meeting remains steady at around 20%.

• To reassess these expectations, investors are awaiting further data on inflation, unemployment, and wage growth in Japan.