The US Dollar (USD) gained strength as markets anticipated potential domestic policy initiatives and reacted to hawkish Federal Reserve (Fed) data releases. Recent US economic indicators, including robust job market openings and a surge in prices paid, fueled speculation about persistent inflation risks, potentially influencing the Fed's monetary policy stance. The release of December's FOMC minutes and a speech by Fed official Chris Waller are expected to provide further insights into the Fed's outlook.
Markets have been tempted in the past couple of days to believe there is some truth behind the Washington Post’s report – quickly rebuked by Trump – that US tariffs will be only on selected products. Markets are also looking with interest at the timeline for the US Congress’ plan to pass a three-in-one bill for taxes, border and energy.
”“Aside from the stronger-than-expected JOLTS job market opening and the headline ISM services index, the most remarkable print was the ISM prices paid subcomponent, which spiked to the highest level since January 2023. If a generally resilient economy was already accounted for when the Fed met in December, a resurgence in inflation concerns could drive an even further hawkish tuning in the policy message.
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