The US dollar is hampered by both geopolitical factors and US inflation.
2026-01-13 19:50:36
Tuesday (January 13th) is the day for the release of US CPI data. Under normal circumstances, investors should be focusing on the Federal Reserve's interest rate meeting at the end of January and the possibility of another rate cut. However, the current market news is dominated by geopolitical issues, with the situation related to Iran being of paramount importance.
As protests intensify, reports indicate that the US president is "leaning" towards military action against Iran, while threatening to impose a 25% tariff on countries trading with Iran. Unlike the previous operation to arrest Maduro in America's "backyard," military action against Iran would be a completely different game, given Iran's important position in the region and the potential for retaliation—especially the risk of a counterattack targeting the Strait of Hormuz.
Although the news remains speculative, it has already been enough to push crude oil prices to their highest level since December 8th. Oil prices are hovering above the $60 mark. Several key resistance levels exist above oil prices, and if the current upward trend continues, the key battle in the market will likely take place in the $63 range.
It's worth noting that gold prices briefly hit a record high of $4,630 before retreating somewhat. While profit-taking and a stronger dollar were the main reasons for this pullback, the overall trend for gold remains bullish, supported by current news. In particular, Trump's obsession with Greenland, which could potentially lead to the disintegration of NATO in extreme circumstances, could provide substantial support for this precious metal.
Mild risk aversion supports a stronger dollar.
After Monday's weakness, the dollar found buying support today, partly due to changes in geopolitical tensions. Monday's dollar weakness was primarily driven by the unexpected investigation into the Federal Reserve. Fed Chairman Powell, deviating from his usual style, responded strongly to the news. Earlier today, the Fed's "number two," New York Fed President Williams, also spoke publicly.
While Williams avoided a direct confrontation with Trump in his statements, he clearly sided with Powell amidst the current controversy, upholding the Fed's independence and credibility. These two core principles are facing serious challenges because Trump has entered the final stretch of nominating the next Fed chair, and his core selection criterion is whether the candidate is willing to significantly lower interest rates according to his wishes.
US CPI data is the most important data release today.
Regarding monetary policy, Williams expressed satisfaction with the current policy stance and the overall positive economic environment, a statement that largely eliminates the possibility of the Federal Reserve cutting interest rates or releasing dovish signals at its January 27-28 policy meeting. Williams also commented on today's key data release—inflation—emphasizing that upside risks to inflation have eased.
Economists predict that the overall inflation rate in the United States will remain unchanged at 2.7%, while the core inflation rate is expected to climb to 2.7%. It is worth noting that the latest minutes of the Federal Reserve meeting show that Fed officials expect the inflation rate to remain high in the first half of 2026, only gradually declining to the policy target of 2% in 2027.
At this stage, the market is more sensitive to inflation data falling short of expectations. If the data meets expectations, or even slightly exceeds them, it is unlikely to shake the market's current assessment—that the Fed will cut interest rates by a cumulative 51 basis points by the end of the year. However, if inflationary pressures ease significantly, it could prompt the Fed to begin its rate-cutting cycle earlier (the market currently expects the rate-cutting window to open in July), especially given the continued dovish rhetoric from extremely dovish officials such as Federal Reserve Governor Milan, which could further reduce the dollar's attractiveness.
The yen continues to depreciate, and official verbal intervention escalates.
When Japanese Finance Minister Satsuki Katayama, Economy, Trade and Industry Minister Takahide Kiuchi, and a Japanese government spokesperson all focused on the yen's exchange rate on the same day—essentially a verbal intervention to boost the yen—this phenomenon clearly indicates the current precarious state of the yen's exchange rate. Influenced by news that Japanese Prime Minister Sanae Takaichi might dissolve the House of Representatives on January 23 and hold a new general election in mid-February, the USD/JPY exchange rate is attempting to break through the 159 level and move out of its recent trading range.
Such political events have reduced the likelihood of the Bank of Japan sending a hawkish signal at its policy meeting on January 22. The risk of the Japanese government actually intervening in the foreign exchange market is rising, and the 160 level is a key threshold for deciding whether to intervene.
As protests intensify, reports indicate that the US president is "leaning" towards military action against Iran, while threatening to impose a 25% tariff on countries trading with Iran. Unlike the previous operation to arrest Maduro in America's "backyard," military action against Iran would be a completely different game, given Iran's important position in the region and the potential for retaliation—especially the risk of a counterattack targeting the Strait of Hormuz.
Although the news remains speculative, it has already been enough to push crude oil prices to their highest level since December 8th. Oil prices are hovering above the $60 mark. Several key resistance levels exist above oil prices, and if the current upward trend continues, the key battle in the market will likely take place in the $63 range.
It's worth noting that gold prices briefly hit a record high of $4,630 before retreating somewhat. While profit-taking and a stronger dollar were the main reasons for this pullback, the overall trend for gold remains bullish, supported by current news. In particular, Trump's obsession with Greenland, which could potentially lead to the disintegration of NATO in extreme circumstances, could provide substantial support for this precious metal.
Mild risk aversion supports a stronger dollar.
After Monday's weakness, the dollar found buying support today, partly due to changes in geopolitical tensions. Monday's dollar weakness was primarily driven by the unexpected investigation into the Federal Reserve. Fed Chairman Powell, deviating from his usual style, responded strongly to the news. Earlier today, the Fed's "number two," New York Fed President Williams, also spoke publicly.
While Williams avoided a direct confrontation with Trump in his statements, he clearly sided with Powell amidst the current controversy, upholding the Fed's independence and credibility. These two core principles are facing serious challenges because Trump has entered the final stretch of nominating the next Fed chair, and his core selection criterion is whether the candidate is willing to significantly lower interest rates according to his wishes.
US CPI data is the most important data release today.
Regarding monetary policy, Williams expressed satisfaction with the current policy stance and the overall positive economic environment, a statement that largely eliminates the possibility of the Federal Reserve cutting interest rates or releasing dovish signals at its January 27-28 policy meeting. Williams also commented on today's key data release—inflation—emphasizing that upside risks to inflation have eased.
Economists predict that the overall inflation rate in the United States will remain unchanged at 2.7%, while the core inflation rate is expected to climb to 2.7%. It is worth noting that the latest minutes of the Federal Reserve meeting show that Fed officials expect the inflation rate to remain high in the first half of 2026, only gradually declining to the policy target of 2% in 2027.
At this stage, the market is more sensitive to inflation data falling short of expectations. If the data meets expectations, or even slightly exceeds them, it is unlikely to shake the market's current assessment—that the Fed will cut interest rates by a cumulative 51 basis points by the end of the year. However, if inflationary pressures ease significantly, it could prompt the Fed to begin its rate-cutting cycle earlier (the market currently expects the rate-cutting window to open in July), especially given the continued dovish rhetoric from extremely dovish officials such as Federal Reserve Governor Milan, which could further reduce the dollar's attractiveness.
The yen continues to depreciate, and official verbal intervention escalates.
When Japanese Finance Minister Satsuki Katayama, Economy, Trade and Industry Minister Takahide Kiuchi, and a Japanese government spokesperson all focused on the yen's exchange rate on the same day—essentially a verbal intervention to boost the yen—this phenomenon clearly indicates the current precarious state of the yen's exchange rate. Influenced by news that Japanese Prime Minister Sanae Takaichi might dissolve the House of Representatives on January 23 and hold a new general election in mid-February, the USD/JPY exchange rate is attempting to break through the 159 level and move out of its recent trading range.
Such political events have reduced the likelihood of the Bank of Japan sending a hawkish signal at its policy meeting on January 22. The risk of the Japanese government actually intervening in the foreign exchange market is rising, and the 160 level is a key threshold for deciding whether to intervene.
- 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.
