The US dollar moved slightly higher against major currencies on Tuesday, supported by weakness in the euro after softer-than-expected inflation data. Overall market moves remained limited, however, as investor attention focused more heavily on commodities and equity markets.
The market reaction to the surprise US operation involving Venezuelan President Nicolas Maduro faded quickly across most asset classes, particularly in foreign exchange. Currency traders largely treated the event as a short-term risk rather than a lasting driver.
At the same time, investors are assessing mixed signals from officials at the Federal Reserve regarding the outlook for monetary policy this year. Richmond Fed President Tom Barkin said interest rate decisions must be carefully adjusted in response to incoming economic data, given risks to both employment and inflation objectives. Barkin does not vote on policy decisions this year.
In contrast, Fed Governor Stephen Miran, whose term concludes at the end of January, argued that the central bank should move more aggressively with rate cuts to support economic momentum. Meanwhile, Minneapolis Fed President Neel Kashkari, a voting member this year, warned that unemployment could rise more sharply than expected.
According to CME Group’s FedWatch tool, futures markets are still pricing roughly an 80% probability that the Federal Reserve will leave interest rates unchanged at its upcoming meeting on January 27–28.
The euro slipped about 0.25% to $1.1692, reversing earlier gains after data showed inflation slowed more than anticipated in Germany and France. European government bond yields fell by around three basis points, while US Treasury yields edged higher, a divergence that pressured the common currency. Traders continue to expect the European Central Bank to keep rates steady throughout the year, assuming inflation remains close to its 2% target.
Sterling also weakened, falling around 0.30% to $1.34995, as investors anticipated similar inflation trends in the UK. The pound had earlier touched a near four-month high against both the dollar and the euro.
Analysts noted that the dollar’s earlier safe-haven bid faded quickly. Strong equity market performance reduced demand for the greenback despite lingering geopolitical risks. Against the Swiss franc, the dollar gained about 0.42%, while it rose modestly against the Japanese yen. The dollar index, which tracks the currency against a basket of major peers, increased 0.19% after slipping slightly the previous day on weaker US manufacturing data.
Elsewhere, the Australian dollar outperformed, reaching a more than one-year high as improved risk sentiment supported commodity-linked currencies. The US dollar was little changed against the offshore Chinese yuan, while the New Zealand dollar edged lower against the greenback.
