The US dollar awaits key data, the euro declines, and the Australian dollar hits a 15-month high.
2026-01-07 19:40:46
The US dollar traded mixed on Wednesday (January 7), while the Australian dollar retreated after rising further to its highest level since October 2024. On Tuesday, the US dollar strengthened against most major currencies, but weakened only against the Australian dollar.
Despite the U.S. arrest of Venezuelan President Maduro over the weekend, dollar traders reacted tepidly, focusing instead on upcoming data releases, including Friday's December nonfarm payroll report.
Amid a less hawkish-than-expected Fed decision, slowing inflation, and signs of further weakness in the job market—despite relatively positive nonfarm payroll data in October and November—investors remain convinced that the Fed may need to implement more than two 25-basis-point rate cuts this year, even though the Fed's own dot plot only shows one.
The 2026 median plot reflects the divisions among committee members: four advocated against rate cuts this year, four supported one cut, and four others wanted two. This divergence was also evident yesterday. Richmond Fed President Barkin stated that given the dual risks to the job market and inflation, interest rate adjustments need to be "fine-tuned" based on new data; while Fed Governor Milan insisted that a significant rate cut was necessary. Minneapolis Fed President Kashkari also leaned dovish, saying he believed the unemployment rate could rise further.
Today's market focus will be on the December ADP private sector employment report, the ISM non-manufacturing PMI for the same month, and the November JOLTS job openings data. Monday's manufacturing PMI fell further into contraction territory, but its employment sub-index improved. Furthermore, compared to November, the ADP four-week moving average shows a significant improvement in private sector employment, meaning there may be upside risks to today's data. The market expects December ADP employment to rebound to an increase of 49,000 from a decrease of 32,000 in November.
If the ISM and JOLTS data are also relatively optimistic, it could drive the dollar to rebound again, as investors reduce some of their bets on the magnitude of rate cuts this year. However, they are unlikely to significantly adjust their positions, as they may still be waiting for the more important non-farm payroll report on Friday.
The euro fell due to weak inflation, while Australian CPI boosted the Australian dollar.
The euro came under pressure and extended its decline today as inflation slowed in Germany and France in December. While the data did not trigger bets on interest rate cuts due to the European Central Bank's "we are in a good position" rhetoric and its upward revisions to growth and inflation forecasts, they do suggest that officials currently have little reason to consider raising rates. Preliminary figures for overall eurozone inflation will be released today, and if yesterday's weak data is confirmed, the euro could fall further.
The Australian dollar gained additional momentum overnight as Australian CPI data reinforced market speculation that the Reserve Bank of Australia (RBA) may soon begin considering raising interest rates. While overall inflation was lower than expected, core indicators remained virtually unchanged, still above 3%.
In its latest policy decision, the Reserve Bank of Australia (RBA) officials discussed when it might be appropriate to begin raising interest rates. Following this data release, traders believe there is approximately a 35% probability of a 25 basis point rate hike at the RBA's February meeting, fully priced in the expectation of a 25 basis point hike before May. This signifies a significant divergence in policy expectations between the RBA and the Federal Reserve, and means traders have ample room to continue pushing up the Australian dollar against the US dollar.
Stocks rose on AI news, while oil prices fell due to geopolitical factors.
All three major Wall Street stock indexes closed higher yesterday, with the S&P 500 and Dow Jones Industrial Average both hitting record highs. The driving factor remained the rise in the technology and semiconductor sectors, and comments from Nvidia executive Jensen Huang boosted market optimism regarding AI investment and demand. Huang stated that the upcoming AI processor will employ a new storage technology layer designed to handle more complex workloads.
Oil prices have been falling since yesterday, possibly related to the agreement between Caracas and Washington to export up to $2 billion worth of Venezuelan oil to the United States following the capture of Maduro. This has sparked market speculation that the United States may ease sanctions on Venezuelan crude oil in the future and may allow companies to invest in its oil reserves.
Despite the U.S. arrest of Venezuelan President Maduro over the weekend, dollar traders reacted tepidly, focusing instead on upcoming data releases, including Friday's December nonfarm payroll report.
Amid a less hawkish-than-expected Fed decision, slowing inflation, and signs of further weakness in the job market—despite relatively positive nonfarm payroll data in October and November—investors remain convinced that the Fed may need to implement more than two 25-basis-point rate cuts this year, even though the Fed's own dot plot only shows one.
The 2026 median plot reflects the divisions among committee members: four advocated against rate cuts this year, four supported one cut, and four others wanted two. This divergence was also evident yesterday. Richmond Fed President Barkin stated that given the dual risks to the job market and inflation, interest rate adjustments need to be "fine-tuned" based on new data; while Fed Governor Milan insisted that a significant rate cut was necessary. Minneapolis Fed President Kashkari also leaned dovish, saying he believed the unemployment rate could rise further.
Today's market focus will be on the December ADP private sector employment report, the ISM non-manufacturing PMI for the same month, and the November JOLTS job openings data. Monday's manufacturing PMI fell further into contraction territory, but its employment sub-index improved. Furthermore, compared to November, the ADP four-week moving average shows a significant improvement in private sector employment, meaning there may be upside risks to today's data. The market expects December ADP employment to rebound to an increase of 49,000 from a decrease of 32,000 in November.
If the ISM and JOLTS data are also relatively optimistic, it could drive the dollar to rebound again, as investors reduce some of their bets on the magnitude of rate cuts this year. However, they are unlikely to significantly adjust their positions, as they may still be waiting for the more important non-farm payroll report on Friday.
The euro fell due to weak inflation, while Australian CPI boosted the Australian dollar.
The euro came under pressure and extended its decline today as inflation slowed in Germany and France in December. While the data did not trigger bets on interest rate cuts due to the European Central Bank's "we are in a good position" rhetoric and its upward revisions to growth and inflation forecasts, they do suggest that officials currently have little reason to consider raising rates. Preliminary figures for overall eurozone inflation will be released today, and if yesterday's weak data is confirmed, the euro could fall further.
The Australian dollar gained additional momentum overnight as Australian CPI data reinforced market speculation that the Reserve Bank of Australia (RBA) may soon begin considering raising interest rates. While overall inflation was lower than expected, core indicators remained virtually unchanged, still above 3%.
In its latest policy decision, the Reserve Bank of Australia (RBA) officials discussed when it might be appropriate to begin raising interest rates. Following this data release, traders believe there is approximately a 35% probability of a 25 basis point rate hike at the RBA's February meeting, fully priced in the expectation of a 25 basis point hike before May. This signifies a significant divergence in policy expectations between the RBA and the Federal Reserve, and means traders have ample room to continue pushing up the Australian dollar against the US dollar.
Stocks rose on AI news, while oil prices fell due to geopolitical factors.
All three major Wall Street stock indexes closed higher yesterday, with the S&P 500 and Dow Jones Industrial Average both hitting record highs. The driving factor remained the rise in the technology and semiconductor sectors, and comments from Nvidia executive Jensen Huang boosted market optimism regarding AI investment and demand. Huang stated that the upcoming AI processor will employ a new storage technology layer designed to handle more complex workloads.
Oil prices have been falling since yesterday, possibly related to the agreement between Caracas and Washington to export up to $2 billion worth of Venezuelan oil to the United States following the capture of Maduro. This has sparked market speculation that the United States may ease sanctions on Venezuelan crude oil in the future and may allow companies to invest in its oil reserves.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
