Dollar Modestly Lower – Currency Thoughts
Dollar Modestly Lower
January 29, 2026
Fed Chairman Powell’s press conference yesterday elicited a subdued reaction in financial markets. Typical of the end of each month, there is an extensive menu of data getting released around the world today and tomorrow.
Relative to Wednesday closing levels, the dollar has slid 0.2% or less against a variety of currencies including the euro, yen, Swiss franc, Mexican peso and sterling. Somewhat bigger 0.4% drops have occurred against the Australian and New Zealand currencies.
U.S. Treasury Secretary Bessent poured some cold water on speculation that a joint operation with Japan to boost the yen with intervention might be in the works.
U.S. stock market action has been dominated by a slew of corporate earnings announcements. Key equity barometers in pre-open futures trading edged up marginally. Asian stock markets closed mixed, with gains of 1.0% in South Korea, 0.5% in Hong Kong and 0.4% in Singapore, no change in Japan, and declines of 1.2% in Indonesia and 09.5% in Taiwan. In Europe, the German Dax and Paris CAC are so far 1.0% and 0.5% in the red, while the British, Spanish and Italian indices each sport 0.8% advances.
10-year sovereign debt yields have declined three basis points in the U.K. but only one of two bps in Germany, France, Italy and Spain. The 10-year U.S. Treasury yield is flat, and the Japanese JGB yield rebounded two basis points.
Strong demand continues for gold and silver, each showing overnight advances of slightly more than 4.0% to record highs. The price of WTI oil jumped 2.6%, whereas Bitcoin is again lagging with a loss of 1.4% from yesterday.
The U.S. goods and services trade deficit rebounded to a 4-month high in November of $56.8 billion, well above street expectations and up from October’s shortfall of $29.2 billion. A January-November deficit of $835.9 billion was 4% wider than a year earlier, pretty much assuring that the full-2025 deficit will exceed the prior year’s total. New U.S. jobless insurance claims last week remained historically low at 209k, and the spectacular 4.9% growth of U.S. labor productivity in 3Q 2025 was left unrevised. Such was the second straight quarterly reading above 4.0% and associated with a 1.9% decline of unit labor costs.
Economic sentiment in the euro area unexpectedly improved this month, climbing 2.2 index points to the best reading in 36 months (99.4 from a 2025 low of 94.8 in March). Sentiment in the industrial and service sectors improved to 32- and 24-month highs. Consumer confidence was left unrevised from the preliminary indication, which had shown the least pessimism in 11 months.
Also in Euroland, on-year growth in the M3 stock of money of 2.9% was a tad less last quarter than the 3.0% average in the third quarter.
Some of the other European data news involved
- Fourth quarter GDP growth in Ireland (-0.6% on quarter and a 6-quarter low year-on-year pace of 3.7%); Sweden (+0.2% on quarter and 1.8% on year); and Belgium (+0.2% on quarter and 1.1% on year). For 2025 as a whole, GDP climbed 1.4% in Sweden after 1.0% in 2024 and but 1.0% in Belgium, matching growth in 2023.
- Producer prices in Greece recorded their biggest year-on-year drop in 14 months (-2.1% in December).
- Icelandic CPI inflation of 5.2% in January was at a 16-month high versus a 59-month low of 3.7% just two months earlier.
- Spanish retail sales in December fell 0.8% on month and rose 2.9% on year. These were the weakest readings in 11 months.
- The Swiss trade surplus size in 2025 of CHF 54.3 billion fell roughly midway between those of 2024 (60 billion francs) and 2023 (CHF 48.3 billion).
- German officials revised downward their forecasts for GDP growth to 1.0% this year and 1.3% in 2027.
Producer prices in Singapore last month dropped 1.7% compared to November and by 3.3% versus a year earlier. That was the most deflationary result in a half year.
South African PPI inflation of 2.9% in December matched the November reading as well as October’s 16-month high.
In central banking news, the Hong Kong Monetary Authority, which subordinates interest rate policy to a policy of fixing the Hong Kong dollar at 7.8 per USD, replicated the Fed’s decision not to change the interest rate, which in Hong Kong’s case is 4.0%.
The Monetary Authority of Singapore also kept its currency-centric monetary policy unchanged.
The Central Bank of Brazil‘s Selic interest rate will continue at 15.0%, its level since last June. Officials there are taking a cautious approach to any decision to beginning reduction because the “current scenario continues to be marked by deanchored inflation expectations, high inflation projections, resilience on economic activity and labor market pressures.”
The National Bank of Ukraine unexpectedly cut its policy interest rate by 50 basis point to 15.0%. This was the first rate change since a percentage point increase last March. Ukraine’s extremely disruptive war with Russia creates extraordinary circumstances in which to promote disinflation and maintain financial market functionality. The bank’s interest rate had been as high as 25% from June 2022 until July 2023 and as low as 13.0% for much of the second half of 2024. “Taking into account the steady decline in inflation and weaker risks of insufficient external financing, the NBU Board decided to start an interest rate policy easing cycle,” according to officials… Thanks to recent EU decisions to support Ukraine through 2026–2027, the risk of insufficient external aid has diminished substantially.”
The Swedish Riksbank left its policy interest rate unchanged as expected at the 1.75% that has prevailed since a 25-basis point cut last September.
The Executive Board assesses that the current level of the policy rate contributes to economic activity strengthening and inflation stabilising around the target in the longer term. The Executive Board has therefore decided to leave the policy rate unchanged at 1.75 per cent. The policy rate is expected to remain at this level for some time to come, in line with the forecast in December.
Copyright 2026, Larry Greenberg.
Tags: Central Bank of Brazil, Euroland economic sentiment, National Bank of Ukraine, Swedish Riksbank
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