USD bounced off session lows after Trump cast doubt on Kevin Hassett’s nomination as Fed chair. While not ruling him out entirely, the remarks eased market concerns over a potentially dovish Hassett-led Fed, which had unsettled USD. Markets are now looking to alternative contenders such as Kevin Warsh, Christopher Waller, and Rick Rieder – figures viewed as more credible and likely to be less dovish – though Powell’s eventual successor is still far from certain.
*Daily move - against G10 rates as of 06:00 GMT, 19.01.26
** Indicative rates - interbank rates as of 06:00 GMT, 19.01.26
Another weekend, another Trump headline driving early market moves. Over the weekend, Trump threatened 10% tariffs on eight European countries backing Greenland. In response, the EU is reportedly preparing tariffs on up to €93bn of US goods if the measures go ahead, with EU leaders set to hold an emergency meeting this week to discuss retaliation. Markets are in a risk off mood as a result with an early USD sell off fading.
Inflation data dominates the week, From the US, we have delayed core PCE data for October and November which should show firm but easing inflation, with annual core near 2.9%. A rebound in consumer spending in November points to resilient demand, but nothing to derail the Fed’s gradual easing narrative.
In Canada, December CPI is expected to tick up to 2.4% YoY on base effects, while core stays sticky. With job pressures easing, the Bank of Canada is likely to stay comfortably on hold into 2026.
UK CPI (Jan 21) should rise to 3.4% YoY due to duties and airfares, but the broader disinflation trend remains intact. Job market data (Jan 20) may be more decisive. Wage growth is likely to slow further, with private-sector pay easing toward 3.7%, while hiring indicators continue to weaken. That keeps the risk skewed towards more dovish pricing for the BoE.
In Japan, headline CPI is set to cool, but underlying inflation should remain firm. The BOJ is expected to hold this month, keeping July as the likely timing for the next hike.
And finally over in New Zealand, Q4 CPI carries upside risk. Adding to the odds or rate hikes this year.
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