Dollar Under Pressure, Political Risks Still Loom
The US dollar closed the week on a weak note on Friday (January 23rd), hovering around 97.80 on the dollar index (DXY) — near a multi-month low — after markets were briefly shaken by the "Greenland drama" and the tug-of-war over Trump's tariff threats to Europe. Although Trump later announced a framework with NATO for Greenland discussions, details were still thin, so investors remained cautious: political risks were not considered completely eliminated.
On the data front, a revision to 4.4% in the US GDP for Q3 2025 provided a cushion, but persistently hot PCE inflation led markets to believe the Fed would be slow to act aggressively — as a result, the dollar struggled to gain ground, especially as the "Sell America" sentiment emerged earlier in the week.
In the daily market, the DXY also slid after the US PMI came in slightly lower than expected, adding to the impression that growth was still progressing, but not as strong as needed to reverse the dollar's trend quickly. Market participants' focus has now shifted to the combination of data versus policy risks, rather than solely on interest rates.
For major currencies, EUR/USD held around 1.174 as Eurozone PMIs delivered mixed signals: manufacturing improving but still contracting, while services declined. Next week, European markets await major data such as German GDP and inflation.
GBP/USD strengthened to around 1.360—its highest level since September 2025—supported by solid UK data (both retail and PMI figures improving), making the pound appear more substantial than the dollar this week.
In Asia, USD/JPY remained fluctuating around 1.58 after the Bank of Japan held interest rates at 0.75%, and markets awaited signals on its next move. Japan's fiscal issues and concerns about potential intervention remain a shadow, making the yen volatile. Meanwhile, AUD/USD approached 0.688—its highest level since 2024/2025—helped by strong Australian domestic data and a boost in risk sentiment, plus the effect of hot precious metals.
Source: Newsmaker.id
