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market analysis
U.S. dollar index rises as market focuses on major U.S. data
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Hello everyone, today XM Forex will bring you "[XM Foreign Exchange Market Analysis]: The U.S. dollar index rises, and the market pays attention to heavy US data". Hope this helps you! The original content is as follows:
On Monday in Asia, the U.S. dollar index fluctuated and rose. The U.S. dollar strengthened on the first trading day in 2026, reversing last year's weak trend that suffered the largest annual decline in eight years. Investors are focusing on a series of key economic data to be released soon for clues on the future direction of the Federal Reserve's policy.
Analysis of major currency trends
U.S. dollar: As of press time, the U.S. dollar index was hovering around 98.55. Last Friday, the U.S. dollar index rose 0.24% to 98.48. The rebound www.xmtraders.comes against the backdrop of a cumulative drop of more than 9% in the U.S. dollar index in 2025. Last year's decline was mainly due to narrowing interest rate differentials with other economies, as well as continued concerns about U.S. finances, global trade tensions and the independence of the Federal Reserve. The market is set to receive a slew of data this week, including the non-farm payrolls report. At present, traders have fully digested the expectation that the Federal Reserve will cut interest rates twice in 2026, while the Federal Reserve internally predicts only one interest rate cut, and there are differences between the two sides. In addition, the longest shutdown in U.S. government history has affected the collection and accuracy of recent data, adding uncertainty to assessments. Investors will also pay close attention to U.S. President Trump's nomination of the next Federal Reserve chair, with current Chairman Jerome Powell's term ending in May.



1. The Venezuelan Supreme Court appointed an acting president and did not start the election process within 30 days
The Venezuelan Supreme Court ordered on the 3rd to appoint the country’s Vice President and Oil Minister Delcy Rodriguez as acting president. According to the country's constitution, if the president is "absolutely absent", power will be transferred to the vice president, and an election must be held within 30 days. It is worth noting that the Supreme Court did not declare President Maduro’s “absolute absence” this time. Some media analysts pointed out that this legal ruling means that procedurally, the requirement to hold an election within 30 days will not be activated for the time being.
2. Analysts: The baht’s rising momentum is expected to www.xmtraders.come under pressure as central bank measures and elections approach
Strategists said the baht’s rising momentum may be weakening as the central bank steps up efforts to curb currency appreciation and election risks resurface. A survey of analysts predicts that the baht may fall to around 32.1 in the first quarter of 2026. The currency ended six consecutive weeks of gains after the Bank of Thailand required financial institutions to declare foreign exchange transactions of more than US$200,000 to control the baht's appreciation. The baht's 8% gain in 2025 makes it Asia's second-best performing currency. But the gains also alarmed analysts as policymakers warned the currency was rising faster than its fundamentals. The growing possibility that officials might intervene to curb its appreciation, www.xmtraders.combined with a host of other factors, has led to expectations of a reversal. Foreign exchange strategists at Overseas Chinese Bank said: "Strengthening supervision of foreign exchange inflows and conducting stricter examination of gold-related baht inflows are among the measures that should curb excessive appreciation of the baht in the first quarter of 2026."
3. Institutions: The United States' most direct intervention in geopolitics in Latin America in more than 30 years has become a market-leading risk
Institutional analysis pointed out that after the United States successfully captured Venezuelan President Maduro, global investors are facing a new surge in geopolitical risks. While the move could unlock the country's vast oil reserves and boost risk assets in the long term, it could trigger a rise in risk aversion when trading resumes. U.S. President Trump said the United States would take over the oil-producing country, and Maduro, who has been repeatedly accused by the United States of running a "narco-state" and manipulating elections, was detained in a New York detention center awaiting trial on Sunday. This is Washington's most direct intervention in Latin America since the invasion of Panama in 1989. Machel Alexandrovich, an economist at the Saltmarsh Economic Institute, said: "This incident reminds us once again that geopolitical tensions continue to dominate news headlines and drive market volatility. Clearly, the market currently has to deal with significantly more headline risks than during previous U.S. administrations."
According to the New York Times, several Americans and Venezuelans involved in transition negotiations revealed that Maduro rejected Trump’s ultimatum in late December to resign and go to Turkey to enjoy a luxurious “exile life.” Last week, he took to the stage again to respond to the latest escalation of U.S. military operations, which claimed to have targeted docks used for drug trafficking. He danced to electronic rhythms on national television, and at the same time recorded his voice repeatedly emphasizing in English: "Don't have a crazy war." Two people who asked not to be named revealed that Maduro's frequent public dancing and other casual behavior in recent weeks led some members of the Trump team to believe that the Venezuelan president was mocking them and trying to expose his so-called bluff. As a result, the White House decided to carry out its military threats.
5. Heavy data is www.xmtraders.coming
On Monday (January 5), China announced the SPGI service industry PMI in December. As a core indicator reflecting the expansion momentum of the service industry, its performance will be cross-verified with the service industry business activity index previously announced by the National Bureau of Statistics, providing a key basis for judging the strength of domestic demand recovery.
In the evening, the U.S. market will receive double major data: December CPI data will reveal the true trend of inflation. In view of the distortion of housing cost statistics due to the shutdown in November data, whether this data can confirm the downward trend of inflation has attracted much attention; the December ISM manufacturing PMI released at the same time will, together with the service industry data, outline the "dual-track" operation situation of the U.S. economy.
Institutional view
1. Citi: The bond market has not fully reflected the possibility of the Reserve Bank of Australia raising interest rates in February and May
Citibank economist Faraz Syed said Australia's monthly inflation report in November is likely to make people more convinced that the Reserve Bank of Australia will raise interest rates in February and May. Citibank forecasts that the average inflation rate for the full year will be 3.3%. He also noted that there are upside risks to the outcome. Syed added that the risk of a sell-off in the bond market may increase in the short term asTraders may be underestimating the likelihood that the Reserve Bank of Australia will start an interest rate hike cycle early. He said the current market expectations for a rate hike in February are only priced at about 10 basis points.
2. Barclays: The next interest rate cut by the Federal Reserve is expected to be in March
Barclays maintains its expectation for the Federal Reserve to cut interest rates in 2026. The bank's U.S. economists said in a report that the Federal Reserve is expected to cut interest rates twice in 2026, by 25 basis points each time, in March and June. They believe there is a greater risk of delaying a rate cut than in this baseline scenario. The information revealed in the minutes of the Federal Reserve's December policy meeting is consistent with Barclays's expectation that the January meeting may be on hold, economists pointed out, "because the Federal Open Market www.xmtraders.committee needs time to assess the impact of recent interest rate cuts."
The above content is all about "[XM Foreign Exchange Market Analysis]: The U.S. dollar index rises, the market pays attention to the heavyweight data from the United States". It is carefully www.xmtraders.compiled and edited by the editor of XM Foreign Exchange. I hope it will be helpful to your trading! Thanks for the support!
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