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Market Insight 05-01-2026

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  • Market Insight 05-01-2026

Daily Currency Market Update – Monday, 5 January 2026

Market Overview

The US Dollar strengthened at the start of the week as markets assessed the implications of a major US military strike on Venezuela and the capture of President Nicolás Maduro. Safe‑haven flows lifted the USD Index to a two‑week high near 98.70, ahead of today’s US ISM Manufacturing PMI release.

Risk sentiment improved modestly through the European morning, with US equity futures up between 0.1% and 0.5%.

GBP/EUR

GBP/EUR rose toward 1.1490, supported by geopolitical tensions and a cautious BoE outlook.

  • Russia reported daily Ukrainian drone attacks on Moscow in early 2026, raising concerns over Eurozone energy security and weighing on the Euro.
  • The BoE’s December cut to 3.75% came with guidance that policy will remain on a gradual downward path, limiting expectations for aggressive easing.
  • Markets expect at least one BoE cut in H1 2026, with a ~50% probability of a second before year‑end.

Outlook: GBP/EUR may remain supported unless Eurozone data surprises. Germany’s preliminary CPI on Tuesday will be the next key driver.

GBP/USD

GBP/USD traded just below the mid‑1.3400s, opening the week slightly weaker as USD strength dominated.

  • The US strike on Venezuela triggered safe‑haven demand, lifting the Dollar.
  • However, expectations for Fed cuts in March and potentially later in 2026 helped cap USD upside.
  • Sterling remained supported by easing UK budget concerns and the BoE’s relatively hawkish tone compared with the Fed.

Outlook: Downside may stay limited unless US data surprises strongly. ISM today and NFP on Friday will set the tone.

EUR/USD

EUR/USD fell below 1.1700, hitting four‑week lows as USD strength extended.

  • Markets looked beyond the Venezuela developments and focused on a heavy US data week.
  • Stronger US housing and labour data last week reinforced expectations of a very gradual Fed easing cycle.
  • Today’s Sentix Investor Confidence and US ISM Manufacturing PMI will guide intraday direction.

Outlook: EUR/USD remains vulnerable unless US data disappoints.

AUD/USD

AUD/USD declined to ~0.6670, pressured by risk‑off sentiment.

  • The US strike on Venezuela triggered a risk‑averse shift, weighing on the Australian Dollar.
  • The USD Index climbed to a three‑week high of 98.80.
  • Markets await Australia’s November CPI later this week, a key input for the RBA after signalling it may tighten again if inflation persists.

Outlook: AUD/USD will be driven by Australian CPI and US NFP later in the week.

USD/CAD

USD/CAD strengthened to around 1.3770, supported by USD gains ahead of US data.

  • Rising oil prices following the US capture of Maduro may offer support to the CAD, given Canada’s role as the largest crude exporter to the US.
  • Traders await today’s US ISM Manufacturing PMI and Wednesday’s Canadian Ivey PMI.

Outlook: USD/CAD may soften if oil continues to firm, but strong US data could slow Fed easing expectations.

USD/CHF

USD/CHF held firm near 0.7940, supported by safe‑haven USD demand.

  • Swiss Real Retail Sales rose 2.3% y/y, below expectations but above the prior reading.
  • CHF may gain on escalating Russia–Ukraine tensions, with Russia reporting 57 drones destroyed over Moscow in a single day.
  • USD strength was driven by geopolitical risk following the US strike on Venezuela.

Outlook: USD/CHF will take direction from US ISM data and broader risk sentiment.

Final Summary

The US Dollar extended its recovery as geopolitical tensions surged following the US strike on Venezuela. Sterling held firm against the Euro and only modestly softened against the Dollar, supported by the BoE’s gradual easing stance. The Euro weakened on USD strength, the Australian Dollar fell on risk aversion, and CAD and CHF traded in line with oil and geopolitical flows. Markets now turn to today’s US ISM Manufacturing PMI and a heavy US data calendar into Friday’s NFP.