CAPITALDIGEST MARKET REVIEW, 19/01/2026
January 19, 2026
DOLLAR HITS SIX-WEEK HIGH AS US JOBLESS CLAIMS UNEXPECTEDLY FALL
The dollar reached a six-week high on Thursday after data showed that the number of Americans filing new applications for unemployment benefits unexpectedly fell last week, further boosting expectations that the Federal Reserve will keep rates on hold for the next several months. Initial claims for state unemployment benefits dropped 9,000 to a seasonally adjusted 198,000 for the week ended January 10, the Labor Department said on Thursday. Economists polled by Reuters had forecast 215,000 claims for the latest week. “We are at the lower end of the range,” said Lou Brien, strategist at DRW Trading, adding that market participants are likely “shifting positions a little bit and pushing the dollar higher as a result.” Brien notes, however, that the U.S. data overstates jobs growth due to flaws in how the data is calculated from the “birth-death model. ” Annual revisions to payroll data are likely to reveal a much weaker labor market when they are released, though those reports come with a significant lag, he said. Fed funds futures have pushed back expectations for the next rate cut to June due to the improving labor data and as Fed policymakers continue to express concern about still sticky inflation.
STERLING EDGES DOWN VERSUS DOLLAR AFTER UK DATA
Sterling slightly pared its fall against the dollar on Thursday after UK economic data showed the economy grew more strongly than expected in November, but failed to affect the policy rate outlook. Traders priced in around 40 basis points (bps) of Bank of England rate cuts by September. UK gross domestic product recorded the fastest growth since June, boosted by a return to full production at Jaguar Land Rover after a cyberattack which hit the carmaker and its suppliers. “Despite the upside surprise, it is important to note that the data are by no means strong,” said Kallum Pickering, chief economist at Peel Hunt. “Economic activity in the UK is, at best, lukewarm, lumpy and remains constrained mostly by a lack of confidence in the policy decisions of the Labour government.” The pound was down 0.05% at $1.3443 , while it was falling by around 0.10% before data. The dollar rose as markets set aside concerns about the Federal Reserve’s independence and shifted their focus to economic data.
US DOLLAR GAINS AS ODDS DROP ON HASSETT BEING MADE FED CHAIR
The dollar gained on Friday after U.S. President Donald Trump praised economic adviser Kevin Hassett at a White House event and said he may want to keep him in his current role, prompting speculation he is less likely to be named as chair of the Federal Reserve. “I see Kevin’s in the audience, and I just want to thank you. You were fantastic on television today. I actually want to keep you where you are, if you want to know the truth,” Trump said. “We have seen some US dollar buying on this headline, as it underscores that the Fed decision is mostly about political credibility,” Adam Button, chief currency analyst at investingLive, said in a note. “Of the candidates, Hassett is seen as the least independent, which in turn is the most-dovish due to Trump’s longstanding desire to cut rates,” Button said. Trump is expected to name his candidate to succeed Jerome Powell in the coming weeks, with Powell’s term due to end in May. The leading four candidates for the role are Hassett, Fed Governor Christopher Waller, former Fed Governor Kevin Warsh and BlackRock’s chief bond investment manager Rick Rieder.
STERLING SET FOR WEEKLY RISE AS UK ECONOMY BOUNCES BACK IN NOVEMBER
Sterling rose on Friday, and was set for its fifth consecutive weekly rise against the euro, after data this week showed that the British economy grew more strongly than expected in November. The pound was up 0.13% to $1.3402. It was on track for a 0.3% weekly rise, after two consecutive weekly declines. The euro edged 0.06% lower against the pound to 86.69 pence , and was set for its fifth straight weekly decline against the pound. Data on Thursday showed UK gross domestic product recorded the fastest growth in November since June, boosted by a return to full production at Jaguar Land Rover after a cyberattack that hit the carmaker and its suppliers. Economists said the figures also suggested that nervousness about finance minister Rachel Reeves’ annual budget statement on November 26 had not affected output as much as feared. Investors continued to almost fully price in two quarter-point interest rate cuts by the Bank of England this year. But markets are not fully pricing in a 25-basis-point reduction until June, and they see only a 6% chance of a cut when the central bank meets next month.
DOLLAR SLIDES, INVESTORS LOOK FOR SAFE HAVENS AS TRUMP UPS TARIFF ANTE
The dollar fell on Monday as investors unnerved by U.S. President Donald Trump’s latest tariff threats against Europe over Greenland piled into the safe-haven yen and Swiss franc, in a broad risk-averse move across markets. Trump said over the weekend he would impose an additional 10% import tariff from February 1 on goods from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland and Britain, until the United States is allowed to buy Greenland. Major European Union nations decried the Greenland tariff threats as blackmail on Sunday, with France proposing to respond with a range of previously untested economic countermeasures. In the foreign exchange market, the knee-jerk reaction in early Asia trade was to sell the euro and sterling , pushing the currencies to a seven-week low of $1.1572 and a one-month trough of $1.3321, respectively. As the trading day got underway, both bounced from their lows, however, with the dollar coming under pressure as investors assessed the longer-term implications of Trump’s latest move on the greenback.