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Wednesday, January 07, 2026
What’s happening: The US dollar rose against major peers on Tuesday, reaching its strongest mark in more than two weeks.
What happened: Investors digested the latest economic reports that signalled some softening in economic momentum in the US.
Markets also responded to comments from Federal Reserve officials and the ongoing situation in Venezuela.
Why it matters: Data released on Tuesday showed that the S&P Global services PMI declined to 52.5 in December from 54.1 in November. The figure also came in below the preliminary reading of 52.9 and market expectations of 54. This marked the softest rise in services activity in eight months as new business growth tumbled to its lowest level in 20 months amid concerns around market demand and a decline in consumer spending.
The S&P Global US composite PMI fell to 52.7 in December, the lowest level in eight months. The recent reading was revised lower from the preliminary reading of 53 and also came in lower than the previous month’s 54.2 as growth rates eased in both the manufacturing and service sectors.
Meanwhile, Fed Governor Stephen Miran said that aggressive interest rate cuts were needed in 2026 to keep the US economy moving forward. Miran’s term at the Fed is scheduled to end later this month. Richmond Fed President Barkin said that “finely tuned judgments” are required for the central bank’s monetary policy. Investors widely expect the Fed to announce two 25bps rate cuts this year.
US President Donald Trump is expected to name a new Fed Chairman in May, raising prospects of a more dovish monetary policy ahead.
Rising geopolitical concerns lent support to the US dollar after Venezuelan President Nicolás Maduro was captured in a US military operation over the weekend. Trump also warned of a second strike in case Caracas does not cooperate.
Maduro and his wife pleaded ‘not guilty’ to charges of drugs and possession of weapons in a New York courtroom on Monday. The US President also signalled possible action against Mexico and Colombia over illegal drug flows.
The US dollar recorded gains mainly against the euro and Swiss franc on Tuesday, even though the Eurozone’s common currency received support from lower-than-projected inflation data in Germany and France.
The US dollar index, which measures the currency’s performance versus a basket of major peers, rose to 98.58 on Tuesday.
The GBP/USD pair edged lower to 1.3501, while the USD/JPY forex pair rose slightly to 156.68 this morning.
What to watch: Investors will keep an eye on December’s NFP (nonfarm payrolls) data from the US, which is scheduled for release on Friday, and would help investors to get further insights into the Fed’s policy outlook. US nonfarm payrolls, which surged by 64,000 in November, following a 105,000 decline in the previous month, are expected to rise by 55,000 in December.
Data on ISM services PMI (1900 UAE Time) and JOLTs job openings (1900 UAE Time) will be released today. The ongoing situation in Venezuela will also remain in focus.
Context: Equity markets in Europe closed higher on Tuesday as investors assessed the latest economic data.
Details: Data released on Tuesday showed that the HCOB flash composite PMI for Eurozone was revised lower to 51.5 in December, from a preliminary estimate of 51.9. The figure also came in below the 30-month high of 52.8 recorded in November.
The HCOB Eurozone services PMI also fell to 52.4 in December from an initial reading of 52.6 and came in below the previous month’s 53.6. This marked the slowest growth in three months.
Inflation unexpectedly eased to 0.8% in France, while Spain’s services PMI signalled stronger growth in the sector. Germany’s inflation eased to 1.8% in December, compared to market estimates of 2% and came in below the European Central Bank’s target of 2% for the first time since September 2024.
Gains in basic resources stocks amid strong metal prices lent support to the overall markets. Shares of major miners recorded gains, with stocks of Rio Tinto and Anglo American settling higher on Tuesday.
The STOXX Europe 600 Index gained 0.58% to close at 605.28 on Tuesday. UK’s FTSE 100 jumped 1.18% to settle at 10,122.73, while Germany’s DAX 40 and France’s CAC 40 added 0.09% and 0.32%, respectively.
What to watch: Investors await the release of economic data on HCOB construction PMI (1230 UAE Time), inflation rate (1400 UAE Time) from the Eurozone today. Analysts expect the annual inflation rate in the Eurozone to ease to 2% in December from 2.1% in November.
The HCOB Eurozone construction PMI, which climbed to 45.4 in November from 44.0 in the previous month, is expected to rise further to 46.9 in December.
Other Markets: US trading indices closed higher on Tuesday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.99%, 0.62% and 0.94%, respectively.
The UK and France agreed to deploy troops in Ukraine if a peace deal is signed with Russia. The news sent the USD/RUB pair lower in forex trading this morning.
Japan’s S&P Global services PMI slipped to 51.6 in December from the preliminary reading of 52.5. The latest reading coming in below November’s reading of 53.2 lent support to the USD/JPY forex pair.
Australia’s private house approvals surged 1.3% to 9,458 units in November, following a 1.3% decline in October, which sent the AUD/USD pair higher in forex trading this morning.
Brazil’s trade surplus surged 107.8% year-over-year to $9.6 billion in December. This being a record surplus for December exerted pressure on the USD/BRL forex pair.
Canada’s S&P Global services PMI climbed to 46.5 in December from 44.3 in the previous month. Services activity remaining in the contraction zone sent the USD/CAD pair higher in forex trading this morning.
France’s HCOB construction PMI (1230 UAE Time), Germany’s HCOB construction PMI (1230 UAE Time), unemployed persons (1255 UAE Time), unemployment change (1255 UAE Time), and unemployment rate (1255 UAE Time), Italy’s HCOB construction PMI (1230 UAE Time) and inflation rate (1400 UAE Time), Singapore’s foreign exchange reserves (1300 UAE Time), UK’s S&P Global construction PMI (1330 UAE Time), India’s fiscal year GDP growth (1600 UAE Time), US MBA mortgage applications (1600 UAE Time), ADP employment change (1715 UAE Time), factory orders (1900 UAE Time), EIA crude oil stocks change (1930 UAE Time), as well as Canada’s Ivey PMI (1900 UAE Time).
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