Market sentiment is weak early Monday as risk appetite fades amid political and geopolitical stress. Key concerns include U.S. President Donald Trump’s clash with the Federal Reserve (Fed), rising Iran–US tensions, and rhetoric around Greenland, alongside developments involving Venezuela, Russia, and China, and mixed U.S. data.
The US dollar fell sharply after Federal Reserve Chair Jerome Powell said the Justice Department issued grand jury subpoenas to the Fed, calling it a politically motivated move that threatens Federal Reserve independence.
Reports of a probe into Powell increased institutional and succession risk at the Fed, potentially lifting Treasury term premia and complicating rate-cut expectations. Senator Thom Tillis said he would block confirmation of any Fed nominee until legal issues are resolved, warning that Fed independence and Justice Department credibility are at risk. If no successor is confirmed, Powell would remain beyond his current term.
Geopolitical risk intensified as the US stepped up planning for possible action in Iran. Protests in Iran lifted oil prices on fears of supply disruptions of up to 1.9 million barrels per day from the OPEC producer. Trump warned that the US has “strong options” to respond to any Iranian attack. He also threatened to block Exxon Mobil from investing in Venezuela, highlighting ongoing political and legal risks to Venezuelan oil recovery.
Markets were volatile after the US December non-farm payrolls (NFP) report. Jobs rose 50K versus 60K expected, with prior data revised lower, while the unemployment rate fell to 4.4% from 4.6%. Average hourly earnings rose 0.3% month-on-month and 3.8% year-on-year. The US University of Michigan (UoM) January preliminary consumer sentiment improved to 54.0, while inflation expectations rose.
Richmond Fed President Tom Barkin welcomed the lower unemployment rate, while Atlanta Fed President Raphael Bostic said inflation remains well above the 2% target and policy must stay cautious.
Political noise increased after Trump leaked jobs data on Truth Social ahead of the official release, which the White House later called an inadvertent disclosure. The Supreme Court decision on tariffs was delayed, keeping markets on edge.
Globally, the US hosted G7 talks on rare earths to counter China’s supply dominance. In Europe, the euro softened as France faced confidence votes that threaten government stability and fiscal plans.
In Japan, Prime Minister Sanae Takaichi is considering a snap election in mid-February, a move seen as negative for Japanese Government Bonds (JGBs) and the yen due to expectations of more fiscal support.
In the UK, hiring weakened for the 39th straight month while wage growth stayed firm, complicating the Bank of England (BoE) outlook. Canada’s employment rose 8.2K in December, though the unemployment rate increased to 6.8% due to higher labor participation.
Looking ahead, the US earnings calendar heats up next week with banks and airlines reporting, alongside key US CPI and Retail Sales data and the start of the Q4 25 earnings season. UK GDP and China trade data are also in focus.
Amid these developments, the U.S. Dollar Index (DXY) eased from a one-month high, ending a four-day rise as investors moved toward safety, pushing gold to fresh record highs. The dollar’s pullback gave EURUSD and GBPUSD some relief, while USDJPY hit a one-year high despite a Japanese holiday. AUDUSD and NZDUSD posted corrective bounces, USDCAD slipped from a five-week high to break a nine-day winning streak, crude oil stayed firm for a third straight day, cryptocurrencies trimmed weekly losses, and Asia-Pacific equities edged lower in a cautious market mood.
The U.S. Dollar’s pullback helped EURUSD and GBPUSD snap their four-day losing streaks, rebounding from one-month and two-week lows, respectively. The Euro stayed firm despite geopolitical risks and mixed European Central Bank (ECB) commentary, while the Sterling Pound overlooked weak UK employment data. In contrast, USDJPY rose even as the Greenback softened overall, supported by a Japanese holiday and expectations of higher fiscal stimulus linked to strong Purchasing Managers’ Index (PMI) signals and talk of snap elections aimed at tightening political control.
Despite a generally cautious mood, AUDUSD and NZDUSD post early Monday gains, while USDCAD slips from a five-week high to record its first daily loss in 10 sessions. The pullback in USDCAD is supported by firmer crude oil prices and slightly better Canada employment data compared with the U.S. jobs report. However, ongoing geopolitical risks and concerns around China continue to cap gains in the Aussie, Kiwi, and Loonie.
Gold rises for a third straight day, extending weekly gains as a softer U.S. Dollar and a flight to safety amid geopolitical uncertainty and Federal Reserve (Fed) concerns lift demand. Strong institutional buying and a technical break above the $4,550 level further push XAUUSD to a fresh record high near the $4,600 mark.
Geopolitical supply risks and a softer USD keep crude oil firmer for a third straight day, even as OPEC+ output concerns and demand worries limit upside for energy markets. Cryptocurrencies also edge higher, supported by the weaker USD and expectations of more crypto-friendly regulations. Meanwhile, equities trade cautiously, failing to extend Friday’s Wall Street gains as investors stay wary ahead of major earnings releases and key U.S. data later this week.
Eurozone Investor Sentiment, India Inflation, and scheduled speeches from the European Central Bank (ECB) and the Federal Reserve (Fed) shape Monday’s economic calendar. Still, the main focus remains on rising Trump–Fed tensions and geopolitical risks linked to Venezuela, Iran, Greenland, and Russia, along with the closely watched U.S. Supreme Court verdict on Trump’s tariff powers.
For the week ahead, key U.S. data, including the Consumer Price Index (CPI), Producer Price Index (PPI), and Retail Sales, will be important, but qualitative drivers such as politics, geopolitics, and policy signals are expected to dominate and keep markets busy.
With the U.S. Dollar (USD) pulling back amid Federal Open Market Committee (FOMC) concerns, softer U.S. data could support USD sellers and benefit major currencies, Gold, Silver, and Equities. Cryptocurrencies, however, may see limited upside due to lingering geopolitical risks and the market’s continued shift toward risk safety.
May the trading luck be with you!
