U.S. Dollar Rises as Markets Eye Fed Policy and Key Economic Data

The U.S. dollar began the first full trading week of the new year with modest gains, strengthening against major currencies as investors focused on upcoming economic data and Federal Reserve policy expectations. Early Monday trading saw the greenback climb to a three-and-a-half-week high against the euro, while also posting gains versus the British pound and the Japanese yen.

Although overall currency movements remained relatively contained, global market sentiment was influenced by heightened geopolitical risks. Investors remained cautious following reports of a dramatic U.S. operation in Venezuela that led to the capture of President Nicolas Maduro, who now faces drug-trafficking charges in New York. This unexpected development added an element of uncertainty to financial markets, potentially supporting safe-haven demand for the dollar.

Market attention is also firmly fixed on the U.S. economic calendar, which could play a decisive role in shaping Federal Reserve policy this year. Key macroeconomic indicators are scheduled throughout the week, starting with the ISM manufacturing survey and concluding with the closely watched monthly non-farm payrolls report on Friday. These data points are expected to provide fresh insight into the strength of the U.S. economy and the future direction of interest rates.

In early trading, the dollar rose 0.1% to around $1.1705 per euro, after briefly touching $1.170025, its strongest level since mid-December. The U.S. currency also advanced 0.1% against sterling to approximately $1.34495 per pound and edged up to 156.90 yen versus the Japanese currency.

Despite the dollar’s firm start, interest rate expectations remain a key variable. Futures markets currently price in two U.S. interest rate cuts this year, contrasting with the Federal Reserve’s own projections, which indicate just one cut amid a divided policymaking committee.

Adding to market focus, investors are closely watching the White House as President Donald Trump prepares to announce his choice for the next Federal Reserve chair. With Jerome Powell’s term ending in May, Trump has indicated he will make his decision this month, signaling a preference for a successor who strongly favors significantly lower interest rates. This looming leadership change could further influence dollar trends and broader financial markets in the months ahead.