Market Dispatch

Central Banks Hiked – USD Won Anyway

Tony Valente — Thu, 01 Oct 2026 15:00:00 GMT

September was the USD’s month, and among the majors covered here the scoreboard was almost a clean sweep. The US index rose roughly 2.2% to 101.19, bouncing from a September low near 98.4 and finishing within reach of July's highs around 101.5. The yen was the lone gainer at +1.49%. Everything else fell: sterling -2.10%, euro -2.43%, loonie -2.61%, Aussie -3.04%, franc -3.25%, and the kiwi dead last at -4.79%. It was a near-mirror of August, when every G10 currency rose, the kiwi led at +3.81%, and the dollar index gave back about 3% from its July highs. Reversals in FX are a cruel joke told twice.

The bond market gave its verdict early, with the 30-year pressing toward 5.25% and the 10-year knocking on 5%. September's message was that the hiking cycle isn't over. It is broadening, and the US is leading it.

The Fed hiked rates by 25 basis points on September 16, unanimously raising the target range to 3.75–4.00%, and signaled the job isn't done. Twelve officials see one more hike this year and four see two, and three see none. The US index had bottomed in the first half of the month and did most of its climbing after the meeting. Warsh's Jackson Hole warning that 65 months of elevated inflation sat "squarely with the central bank" was the mission statement, not the rhetoric.

Bessent's Bargain: Bonds Saved, Dollar Sacrificed

Tony Valente — Thu, 03 Sep 2026 15:00:00 GMT

August opened with commodity currencies ripping higher and the dollar bleeding out across the board. The final month-to-date chart shows the rally has moderated but the greenback remains on the defensive.

The real story broke on August 19, when Treasury Secretary Scott Bessent doubled liquidity-support buybacks in the 10- to 20-year and 20- to 30-year sectors from $2 billion to at least $4 billion per operation. The 30-year yield dropped 8–10 basis points, gold surged 4.3% to $4,525/oz, and the dollar sold off. That was the tell.

This was not an isolated decision. As Yahoo Finance reported on August 9, Bessent had already staged the first U.S. yen intervention since 1998, nudged Tokyo toward the Fed's FIMA repo facility to avoid Treasury sales and altered bond-sales guidance to open the door to long-bond supply cuts. Priya Misra at JPMorgan Asset Management called the sequence an attempt to signal that Treasury "does not hesitate to use the different tools at their disposal." The 30-year had just printed 5.33%, a 19-year high. Within 24 hours, the fiscal authority stepped in. There is now a put under the long bond.

Warsh's Hawkish Bluff

Tony Valente — Tue, 04 Aug 2026 15:00:00 GMT

The USD was mixed against the G10 for most of July before selling off sharply in the final week, leaving the DXY roughly 1.6% lower month-to-date. The New Zealand dollar led the field, rallying 3.81% against the greenback, followed by the Japanese yen at +2.80%. The Australian dollar and sterling gained 1.74% and 1.72% respectively, while the Canadian dollar added 1.28%. The euro managed a 1.01% advance, and the Swiss franc barely budged at +0.09%. The late-month sell-off was less about a single weak data point than a broader loss of confidence in the dollar's policy support. As DoubleLine's Jeffrey Gundlach put it, "the market didn't buy what Chairman Warsh was selling." During Warsh's second press conference as Fed chair, the 30-year Treasury yield surged 10 basis points to 5.21%, its highest level in 19 years, while the 10-year climbed to 4.67% and the two-year actually fell four basis points. That bear steepening was the bond market's verdict: hawkish talk without a hike simply raises the inflation risk premium at the long end. Equities delivered their own verdict, with the Dow plunging 1,153 points, its worst day since April 2025.

Fed Rhetoric vs. DXY Technical Realities
The FOMC held the fed funds rate at 3.50–3.75% in July. Despite Chair Warsh asserting there is "no soft target" and three regional presidents dissenting in favour of an immediate hike, short-term rates fell as futures continued to price in minimal tightening of roughly 36 bp. Gundlach's read is straightforward: if Warsh is truly committed to getting inflation to 2%, holding rates steady while war-driven commodity prices keep climbing is inconsistent with that goal. The bond market is essentially calling that bluff. Warsh's signature move as chairman has been to strip out forward guidance and let markets do the tightening for him, "we're observing" the material tightening in real rates, he said, even though "we haven't done much in 42 days." But when Bloomberg's Michael McKee asked him directly, "What are you waiting for?" Warsh could only reply that the discussion was "the farthest thing from inertia." The market was unmoved.

The credibility problem runs deeper than rhetoric. Warsh's case for patience rests on AI-driven productivity gains, which he claims are keeping aggregate supply robust. Yet Barclays economists find no statistically significant link between industry-level AI adoption and productivity growth, while a Federal Reserve Board discussion paper this month concluded that micro-level gains are "not adding up in aggregate." Skanda Amarnath of Employ America went further, calling the productivity claims in the FOMC statement "factual inaccuracies" that "smell of potential politicking." When the Fed chair's own research division undermines his central argument, the market's scepticism is rational, not reactive.

The Hawkish Shift

Tony Valente — Thu, 02 Jul 2026 15:00:00 GMT

The greenback dominated June, extending its broad rally and leaving the G10 complex in its wake. As the attached chart illustrates, the USD appreciated against every major peer on a month-to-date basis. The Dollar Index broke above 100 and touched a one-year high, fueled by Kevin Warsh's hawkish pivot at the Fed. His first FOMC meeting produced the largest hawkish surprise among 57 events tracked by the San Francisco Fed since January 2020, a notably terse statement stripped of forward guidance, with Warsh declining to submit his own projections to the SEP. The swaps market now prices one hike fully for 2026 and ~50% chance of a second.

US economic resilience underpinned the repricing: job creation averaged 115k/month in Jan–May 2026 versus just 10k in 2025, and the Bloomberg hard data surprise model hit a four-year high. May CPI accelerated to a 6% annualized pace through the first five months. The 30-day DXY/two-year yield correlation surged to ~0.75, near its highest since late 2016.

A Fragile Calm: US Resilience, Fed Transition, and the Search for Direction

Tony Valente — Mon, 01 Jun 2026 15:00:00 GMT

The month of May has delivered a textbook example of a market caught between relief and residual anxiety. The NZD has emerged as the clear outperformer, gaining 1.39% against the greenback, while the JPY and CAD have lagged, down 1.67% and 1.56% respectively. The CHF and USD itself have barely budged, with the franc up just 0.02% and the USD flat against its own benchmark. The AUD has softened by 0.24%, the EUR by 0.61%, and sterling by 1.09%. This dispersion tells a story of commodity-linked currencies reacting to diverging energy and risk dynamics, while the major European currencies grapple with growth concerns and the lingering shadow of the Middle East conflict.

The US dollar index (DXY) has spent the month in a relatively tight range, currently hovering near 99.00 after a modest 0.93% gain over the past month but still down 0.36% on a twelve-month view. The dollar's resilience owes much to the Federal Reserve's higher-for-longer stance and the safe-haven bid that persists whenever geopolitical headlines flare. Yet the greenback has lacked the conviction to break decisively higher, hemmed in by a market that is increasingly questioning whether the peak of the dollar cycle has already passed.

The Unwinding – Hope Springs Eternal

Tony Valente — Tue, 05 May 2026 15:00:00 GMT

April was a month of transition and retracement as the March risk-off/war premium reversed alongside a sharp collapse in market-priced rate hikes. The USD, which had rallied sharply in March on the back of the Middle East war and a repricing of Federal Reserve expectations, gave back a significant portion of those gains as optimism about a negotiated settlement took hold. The Dollar Index fell for three consecutive weeks, its longest losing streak in a year, and briefly traded below 97.65, its lowest level since the conflict began, before recovering slightly ahead of month-end.

The relative performance chart tells the story clearly. The Australian dollar led the G10 pack, gaining over 4.3% month-to-date against the greenback, propelled by aggressive Reserve Bank of Australia (RBA) tightening and robust commodity prices. Sterling and the New Zealand dollar followed closely, both appreciating nearly 3%, as the market unwound safe-haven USD positions and re-engaged with higher-beta currencies. The euro and Swiss franc posted solid gains of around 2.4% and 2.2% respectively, while the Japanese yen lagged the recovery, gaining only 1.4% as the Bank of Japan (BOJ) signaled no immediate urgency to hike rates. The Canadian dollar also underperformed, held back by deteriorating labor market data and concerns over USMCA renegotiations, despite the pullback in the USD.

The primary driver throughout April was the shifting geopolitical narrative. Progress in US-Iran negotiations and a ceasefire between Israel and Lebanon fueled a powerful risk-on move. The S&P 500 and Nasdaq reached new record highs, while oil prices tumbled, June WTI fell 7.6% last week alone, briefly trading below $79 per barrel after peaking near $104 in early March. This reversal in sentiment triggered a dramatic unwind in rate expectations. At the height of the war panic in late March, the swaps market had priced in more than three Federal Reserve hikes and nearly three European Central Bank (ECB) hikes. By month-end, those expectations had collapsed to roughly a 65% chance of a single Fed cut this year, and two ECB hikes with the first not fully priced until July.

Middle East War and Oil
The war remained the dominant fundamental condition, but the market's base case shifted from escalation to resolution. The backwardation in oil prices, May WTI near $111 versus September below $78, reflected this tension. While shipping disruptions, insurance costs, and supply chain bottlenecks will linger, the immediate threat of a regional energy crisis receded, removing a key pillar of USD support.

Central Bank Divergence
The RBA emerged as the most hawkish G10 central bank, hiking twice already this year and signaling a third move in early May. Governor Bullock's rhetoric has been unambiguous: inflation remains too high, and the board is prepared to act pre-emptively. In contrast, the BOJ dashed market expectations by failing to prepare the ground for an April hike, causing the probability of a move to collapse from 75% to under 7%. The market now looks to June or July for the next Japanese tightening. The Bank of England (BOE) finds itself in a more delicate position. The UK economy showed surprising resilience, February GDP rose 0.5%, the strongest monthly print since June 2023, but inflationary pressures from higher energy costs and political uncertainty ahead of the May 7 local elections have kept rate expectations volatile. The swaps market now prices in two BOE hikes this year, down from a peak of three in late March.

Federal Reserve in Flux
Perhaps the most underappreciated story is the institutional uncertainty at the Federal Reserve. Chair Powell's term ends on May 15, and while Kevin Warsh's confirmation as successor has been cleared by the end of the Justice Department's probe, his confirmation hearing revealed a clear break from the Bernanke-Yellen-Powell era of continuity. Warsh has signaled potential changes to the inflation target framework and a rethinking of the Summary of Economic Projections. With no FOMC meeting in May, we expect Powell to remain in a caretaker capacity until Warsh takes the chair at the June meeting, but the transition adds an extra layer of uncertainty to USD positioning.

What to Watch in May

RBA Decision (May 5)
The market is pricing in roughly a 75% chance of a 25bp hike to 4.35%. Citi's Josh Williamson warns that the RBA's "headache is about to become a migraine," with headline inflation potentially reaching 5.5% by mid-year. We expect the hike to be delivered, but the accompanying Statement on Monetary Policy will be critical for gauging whether the board sees a terminal rate near 4.60%. A hawkish surprise could extend the Aussie's rally, though technical indicators suggest it is overbought above $0.7200.

UK Local Elections (May 7)
The ruling Labour Party is expected to suffer significant losses. Council seat losses approaching 1,500–2,000 could trigger a leadership challenge to Prime Minister Starmer, who is already under fire over the Peter Mandelson appointment in the wake of the Epstein revelations. Deutsche Bank warns that a sufficiently poor showing could keep risk premia elevated in UK gilts and sterling. With 10-year yields already above 5.00%, political instability could push them another 10–20bps higher. The pound's recovery to $1.35 may face a stern test if the results reignite fiscal concerns.

US Jobs and Fed Transition (May 8)
The April nonfarm payrolls report will be scrutinized for signs that the labor market is cooling sufficiently to justify the market's dovish Fed repricing. The Atlanta Fed's GDPNowcast for Q1 sits at 1.3%, and any significant jobs miss could cement expectations for a cut later this year. However, with Warsh's confirmation still pending and Powell's term ending mid-month, Fed communications will likely be cautious.

Oil and Geopolitical Risk
While the market is pricing in de-escalation, the situation remains fragile. The firing of US army generals and new attacks on Middle East infrastructure in early April served as a reminder that the conflict could reignite quickly. Any breakdown in negotiations would likely see oil prices spike and the USD reassert itself, particularly against the euro and yen.

USMCA and Trade Policy
The US review of the USMCA pact is ongoing, with discussions around boosting domestic content requirements in the auto sector. This poses a specific risk to the Mexican peso and Canadian dollar, both of which have benefited from the April USD weakness. Mexico has moved to ease tensions over electricity market access, but the renegotiation timeline remains a source of uncertainty.

Conclusion
May opens with a sense of transition rather than resolution. The aggressive tightening cycles priced in during the war's peak have been largely unwound, but inflationary pressures from higher energy costs are proving stickier than hoped. The RBA is likely to hike again, the BOJ remains on hold with the next move likely higher, and the ECB and BOE both have rate hikes priced for 2026. Notably, the Federal Reserve stands alone among major central banks in having no rate hike discounted for this year, in fact, the market leans toward eventual cuts, which leaves the Fed looking dovish by comparison even as it remains in leadership limbo. The Bank of Canada, meanwhile, sits alongside the Fed in the on-hold camp, with Governor Macklem taking a cautious, data-dependent stance after the March cut to 2.75%. For FX dealers, the key trade is navigating the divergence between central banks that are still hiking or hawkish (Australia, UK, eurozone, Japan) and those that are on hold with a dovish tilt (US, Canada) or actively cutting (Mexico). The USD's correction may have further to run in the near term, but with geopolitical risk still simmering and US rate expectations already heavily skewed toward cuts, the downside from current levels may be limited. Watch the RBA, the UK ballot boxes, and any headlines from the Middle East, they will set the tone for the month ahead.

The FX Paradox – Safe Haven or Structural Shift - Ascendant Payments

Tony Valente — Wed, 01 Apr 2026 15:00:00 GMT

The USD has strengthened sharply through the final week of March, with month-to-date gains extending across all G10 currencies. The outbreak of hostilities between the US and Iran on February 28 initially triggered a classic flight-to-safety bid, but the rally has gathered momentum as Treasury market dysfunction and diverging central bank outlooks have reinforced dollar dominance.

The GBP has proven the most resilient, declining 1.66% against the greenback, supported by a hawkish repricing at the Bank of England. The CAD (-1.82%) has held up relatively well despite the Bank of Canada holding rates at 2.25% on March 18, with Governor Macklem emphasizing readiness to respond to evolving conditions. Oil prices remaining elevated above $100/barrel continues to underpin the loonie even as the USD strengthens broadly.

The European complex has fared worse. The euro (-2.61%) has retreated decisively below its 200-day moving average as markets removed rate cut expectations from ECB pricing while growth concerns mount. The yen (-2.65%) has suffered as a net energy importer facing elevated import costs and widening yield differentials.

The commodity bloc has experienced a dramatic reversal from earlier in the month. The AUD (-3.37%) has sold off sharply despite initial resilience, reflecting risk-off sentiment and concerns about Chinese growth spillovers. The NZD (-4.19%) has underperformed most significantly, bearing the brunt of deteriorating global risk appetite and terms of trade pressures.
Most striking remains the Swiss franc's decline (-3.78%), which has underperformed even the euro despite real Swiss rates hovering around 0%. This suggests markets are taking SNB intervention threats seriously, or that traditional safe-haven mechanics are expressing differently in this conflict, perhaps through USD and Treasury channels rather than CHF appreciation.

The current geopolitical environment presents a classic FX conundrum: war is typically bullish for the USD, until the structural costs begin to outweigh the immediate liquidity demand. We are witnessing a paradox in which conflict strengthens the USD’s short‑term position through crisis hedging while simultaneously eroding the institutional foundations of its long‑term dominance.

For the first time in recent memory, US Treasuries are not behaving as the unquestioned safe-haven: wartime spending and renewed domestic stimulus are driving larger fiscal deficits, while a run of “ugly” Treasury auctions and softer bid‑to‑cover ratios hint at growing investor fatigue with absorbing ever‑increasing US debt supply.

Tariffic Supreme - Ascendant International Payments

Tony Valente — Mon, 02 Mar 2026 16:00:00 GMT

As we close the books on February, the currency markets have finished the month in a state of stark divergence. The Australian Dollar emerged as the undisputed leader of the G10 complex, surging 2.13% against the Greenback to finish the month at 0.7110. This outperformance was solidified following the Wednesday, February 25, release of a firm January CPI print, which significantly boosted market confidence in a May rate hike by the Reserve Bank of Australia. This data sent the Aussie climbing to a peak of almost 0.7125 in the final sessions of the month. In contrast, the rest of the majors struggled to keep pace with the shifting U.S. policy landscape. The Japanese Yen (JPY) and Swiss Franc (CHF) saw modest retreats, while the Euro (EUR) and New Zealand Dollar (NZD) weakened further. The British Pound (GBP) remained the primary laggard, ending the month significantly lower as markets re-priced the UK’s growth outlook against a backdrop of persistent global trade tensions.

Much of the AUD's outperformance can be traced back to the Reserve Bank of Australia’s surprise decision on February 3 to hike the cash rate to 3.85%. This move, which marked the first increase in over two years, was driven by persistent domestic inflation that currently sits at 3.8%. Governor Michele Bullock has adopted a hawkish stance, emphasizing that there is no set path for future rates and that the board remains prepared to act further if necessary. This policy divergence, occurring while other major central banks consider the end of their tightening cycles or even rate cuts, has fundamentally altered the yield landscape in favor of the Aussie, making it a favorite for carry-related strategies this month.

The Davos Revolt and the Warsh Rescue - Ascendant Payments

Tony Valente — Tue, 03 Feb 2026 16:00:00 GMT

Before diving into the geopolitical shifts at Davos, we must look at the scoreboard. January was a rare unanimous month where every major currency gained significant ground against the USD. While the USD’s “benign neglect” provided the baseline, these specific factors amplified the moves:

The Antipodean Alpha (AUD & NZD)

The Australian and New Zealand Dollars were the clear winners this month.

AUD: Despite no formal meeting in January, the Reserve Bank of Australia (RBA) was forced into a hawkish corner by hot quarterly CPI data. This, combined with a fresh round of fiscal stimulus from Beijing, made the AUD the “reflation trade” of choice.
NZD: Sentiment was bolstered by the ANZ Business Outlook, which revealed that despite high rates, pricing intentions remain stubbornly elevated, effectively killing off hopes for a dovish pivot from the RBNZ anytime soon.

The “Silk Road” Sterling (GBP)

The Pound outperformed the Euro and CAD, largely on the back of Prime Minister Keir Starmer’s diplomatic offensive in Beijing. By signaling a “reset” in UK-China relations, Sterling caught a bid from investors looking for growth narratives independent of the U.S. tariff umbrella. Furthermore, BRC Shop Price Inflation data showed that the “last mile” of disinflation in the UK is proving difficult, keeping the Bank of England in a more restrictive stance than its G7 peers.

The Managed Ascendance (JPY & CHF)

JPY: The Yen’s performance was driven by the Bank of Japan’s (BoJ) January 22-23 meeting. While they held rates at 0.75%, the outlook was decidedly hawkish, confirming that the era of negative or near-zero rates is firmly in the rearview mirror. This was later bolstered by the Fed’s “rate check” on the BoJ’s behalf.
CHF: The Swiss Franc remained the preferred destination for “Davos Anxiety.” SNB Chairman Schlegel maintained a steady hand, intervening only to smooth out the most aggressive spikes, allowing the CHF to retain its crown as the ultimate defensive play.

The Divergent Neighbors (EUR & CAD)

EUR: Interestingly, the Euro rose +0.85% as the ECB left rates unchanged. Accounts from the previous meeting released on January 22nd showed policymakers are in “no hurry” to change policy and appear comfortable with market bets for steady rates through 2026. This stability, coupled with the structural win of the landmark EU-India and India-Russia trade deals, provided a resilient floor for the single currency.
CAD: The Loonie was the laggard of the group. While the Bank of Canada (BoC) held rates at 2.25% on January 28, Governor Tiff Macklem expressed concern over “trade-induced volatility.” The CAD struggled to decouple from the U.S. narrative as fears of retaliatory tariffs on Canadian exports weighed on the outlook.

January 2026 will be remembered as the month the “Middle Powers” officially declared their independence from the post-war financial order, and the USD, for a time, seemed content to let them go. It was a month characterized by the “Carney Manifesto” at Davos, a rare and aggressive “rate check” by the Federal Reserve, and a period of “benign neglect” from the White House that sent precious metals into the stratosphere.

However, just as the Greenback appeared to be in a terminal tailspin, a single personnel announcement, the nomination of Kevin Warsh as the next Fed Chair, snapped the market back to reality, triggering one of the most violent reversals in recent memory for gold and silver.

The World Economic Forum usually serves as a platform for globalist cooperation, but this year Mark Carney used it to deliver a eulogy for the old order. Carney’s speech was a searing critique of the current geopolitical landscape, urging nations to stop “living within the lie” of a system that no longer serves the collective good. He advocated for “Strategic Autonomy,” a call to action for middle-power nations to diversify their dependencies.

The response was immediate. We saw a coordinated “reset” of diplomatic and economic ties that bypassed the traditional Washington-centric route:

The UK-China Reset: Following Canada’s lead from earlier in the month, UK Prime Minister Keir Starmer traveled to Beijing to “reset” the relationship, signaling that the UK is no longer willing to sacrifice trade for ideological alignment with the U.S.
Eurozone-India & Russia-India Deals: The Eurozone finalized a landmark trade deal with India, while New Delhi simultaneously deepened its ties with Moscow. These “non-aligned” trade corridors are the physical manifestation of Carney’s Davos doctrine.

The market read this as a structural shift: if the world no longer needs the USD as its primary bridge, the long-term floor for the USD has just been lowered.

While the politicians were talking in Switzerland, the technocrats in Washington were making waves. On January 23, the market was jolted by reports that the Federal Reserve had conducted a “rate check” on the Yen. While rate checks are not unheard of, this one carried a stunning distinction: sources indicated the Fed explicitly stated it was acting on behalf of the U.S. Treasury.

This is a highly unusual and aggressive form of verbal intervention. It signaled a rare alignment between the Fed and the Treasury to cap USD strength. By checking rates on behalf of the Treasury, the Fed signaled that the U.S. was no longer passive about the Yen’s weakness. The signal to the FX desks was loud and clear: The U.S. wants a weaker USD. This was the “green light” the bears had been waiting for.

President Trump’s arrival at Davos only added fuel to the fire. Rather than soothing the concerns of the middle powers, he leaned into protectionism, announcing new tariffs as a direct retaliation to the burgeoning trade deals in Europe and Asia.

However, the real bombshell came when Trump was asked about the recent weakness in the USD, which had slid to levels not seen in about four years. Instead of expressing concern, he said the dollar’s value was “great” and brushed off worries about the decline, suggesting he was comfortable with current levels. In FX parlance, this is the return of “Benign Neglect”—a policy where the U.S. government allows its currency to slide to gain a competitive trade advantage.

The reaction was explosive. Between the “Bessent factor” (Scott Bessent’s influence on fiscal policy) and Trump’s comments, the market concluded that the U.S. has plenty of “agency” in setting the FX rate and is currently choosing a lower one.

The Result: The USD plunged, and metals flew. Gold and Silver became the primary beneficiaries of this “Great Debasement” narrative. For a few weeks, the “Sell America” flow was the dominant trade on every macro desk.

By the final week of January, the USD was bleeding out, and silver was hitting decade highs. The market was positioned for a total collapse of the Greenback. Then, on January 30, the narrative shifted 180 degrees.

The announcement that Kevin Warsh would be nominated as the next Fed Chair acted as a tourniquet. Warsh is perceived by the market as a “hard money” advocate—someone who is likely to prioritize the Dollar’s stability and potentially pursue a more aggressive Quantitative Tightening (QT) path than his predecessor.

The “Warsh Rebound” was instantaneous. The USD didn’t just stop falling; it surged as short positions were squeezed. The impact on the “haven” assets was catastrophic:

Silver and Gold: The metals market, which had been pricing in a permanent debasement of the USD, saw a massive liquidation. Silver, in particular, suffered “big damage,” as the speculative froth was blown off in a single afternoon.
Market Sentiment: The Warsh nomination sent a message that while the President might be unconcerned about a weak USD, the new leadership at the Fed might not be so permissive.

Despite the late-month recovery in the USD, the underlying issues raised in the Japanese Bond (JGB) and British Gilt markets remain. These markets are behaving as barometers of fiscal instability. Chronic deficits in the West are the “foundations of a long journey” toward eventual debasement.

We may not be in a short-term monetary crisis yet, but the “slated Great Debasement” is the long-term path. January showed us that the journey will be volatile. The “Middle Powers” are building the lifeboats (trade deals and gold accumulation), while the U.S. is oscillating between wanting a weak USD for trade and a strong USD for global prestige.

As we move into February, the “Warsh Factor” will be the primary driver. The market will be hypersensitive to any comments from the nominee regarding the balance sheet and interest rates. However, we must navigate a significant contradiction. While the market bought the USD on the news of a “credible hawk,” we cannot forget that President Trump’s primary selection criterion is a candidate’s willingness to pursue lower interest rates.

January was a masterclass in how quickly geopolitical rhetoric can be upended by personnel and policy shifts. The “Middle Powers” may have found their voice, but as the month ended, the Federal Reserve reminded everyone who still holds the megaphone.

Year-End Report Card - Ascendant International Payments

Tony Valente — Tue, 06 Jan 2026 16:00:00 GMT

2025 delivered a broad-based setback for the USD, which declined against all major currencies. Year to date, the greenback is down 14.46% against the Swiss franc, 13.36% against the euro, 7.81% against the Australian dollar, 7.54% against the British pound, 4.81% against the Canadian dollar, 2.86% against the New Zealand dollar, and 0.30% against the Japanese yen. This decline reflects resilience in foreign economies, a recalibration of safe-haven demand, and a shift in global interest rate expectations. Specifically, regarding interest rates, some countries have completed their easing cycles and there is an increasing probability of the beginning of a tightening cycle in Australia, New Zealand, and Canada in the second half of the year.

Below, we take a closer look at the USD and the other G10 currencies, providing a brief assessment of the economic backdrop and central bank outlook, followed by a technical view on where each currency might be headed in 2026.

Current Monetary Policy Stance

USA – USD

Economic & Policy Outlook:

The U.S. economy ended 2025 with solid growth and easing inflation, but the policy mix in 2026 shifts meaningfully. The “big beautiful bill” is set to deliver increased fiscal spending and significant tax cuts, providing near-term support to activity while raising longer-term inflation risks.

Monetary policy divergence remains a key theme. The easing cycle across most other G10 central banks appears largely complete, while the Fed’s latest Summary of Economic Projections still signals just one rate cut in 2026. Markets, however—possibly factoring in potential personnel changes—are pricing at least two cuts. We anticipated this divergence, which has driven our bearish USD view. That said, the market has largely absorbed this narrative, and momentum indicators suggest the dollar’s decline is over-extended in the near term. A period of consolidation now looks likely.

Political risk will also return to the foreground ahead of November’s U.S. midterm elections. With Congress narrowly divided, even modest seat changes could influence fiscal policy, central bank oversight, and defense spending. As a result, asset managers and corporate treasurers are likely to maintain contingency plans around debt-ceiling risks and the future path of industrial policy spending.

Technical View:

The U.S. Dollar Index (DXY), which tracks the USD against a basket of six major currencies, has declined nearly 11% in 2025, falling from above 110 in January to just below 98 at the end of December. On the monthly chart, the index is testing a major trendline that stretches back to 2011. Technically, the DXY has broken below its 200-day moving average and breached support at 98.00, suggesting further downside risk unless U.S. data surprises to the upside. The next significant support level lies near 92.50, while resistance stands at 100.

CHF – Swiss Franc

Economic & Policy Outlook:

Switzerland’s low-inflation economy continued to defy global trends throughout 2025. The Swiss National Bank (SNB) surprised markets with an early rate cut in March but adopted a wait-and-see posture for the remainder of the year. Despite lower policy rates, the CHF remained remarkably strong, aided by persistent current account surpluses and safe-haven inflows amid geopolitical uncertainty. The SNB did not intervene aggressively in FX markets, reinforcing the currency’s upward bias. Looking to 2026, if global risks persist, the CHF could see further strength, though the SNB may step in if appreciation becomes excessive.

Technical View:

USD/CHF broke below key support at 0.8800 in April and extended lower toward the 0.80 handle by year-end. Momentum indicators remain oversold on the weekly chart, but trendlines suggest potential downside toward the 2011 low near 0.71 if U.S. yields continue to slip. Resistance comes in at 0.8200 and then 0.8400. A sustained recovery will require a clear shift in Fed rhetoric or a rise in global risk appetite.

EUR – Euro

Economic & Policy Outlook:

The eurozone economy staged a gradual rebound in 2025, led by stronger-than-expected German industrial data and improving services PMI figures across the bloc. The ECB delivered its first rate cut in June but emphasized a cautious, data-dependent approach, with additional cuts in the second half as inflation moderated. Sticky wage growth and firm core inflation earlier in the year lent support to the EUR, though a softening in the latter months tempered gains. For 2026, the ECB is likely to continue easing gradually if growth remains stable, potentially capping EUR upside.

Technical View:

EUR/USD carved out a steady uptrend since bottoming near 1.02 in January, breaking through 1.09 in May and capturing and staying above 1.15 the back half of the year. The pair now faces resistance at 1.18, followed by 1.2275 A break of the latter would open the door to 1.25. RSI is elevated but not extreme, and moving averages remain in bullish alignment. Support is seen at 1.15.

GBP – British Pound

Economic & Policy Outlook:

The UK economy avoided recession in 2025, with a resilient labor market and stubborn inflation keeping the Bank of England on edge. The BoE initiated its first rate cut in Q3 as anticipated, but policymakers remained noncommittal amid political stability post-July elections. Weak productivity and Brexit-related trade frictions persisted as long-term drags, but sentiment improved in the latter half. Heading into 2026, further cuts may occur if inflation eases, supporting modest GBP gains if risk appetite holds.

Technical View:

GBP/USD started the year near 1.22 and managed to break above 1.265 in March, paused at 1.30 for a month, and proceeded to rally near 1.38 by July. It then moved back to test the 1.30 and ralled off of that to finish the year near 1.3450. A weekly close above 1.3650 would be technically significant, potentially opening the path back to 1.38 followed by 1.4250. Initial support lies at 1.3150 and at 1.30.

JPY – Japanese Yen

Economic & Policy Outlook:

The Bank of Japan remained a global outlier in 2025, slowly transitioning away from ultra-accommodative policy after ending negative rates earlier in the year. Rising wage growth and signs of inflation persistence prompted a more hawkish stance in the second half, contributing to a rebound in USD/JPY. Still, the yen continues to struggle despite the fact that the BOJ is the only central bank hiking rates. For 2026, additional hikes could occur if inflation holds, particularly if USD/JPY pressures ease.

Technical View:

USD/JPY staged a sharp reversal from its January highs near 158, falling to 140 by April amid intervention fears and softer U.S. yields, but rebounded strongly in the second half to close near 157. The pair now finds support at 155 and 150. Resistance sits near 162. The BOJ’s verbal jawboning and actual intervention remain key risk factors, and implied vol remains elevated.

NZD – New Zealand Dollar

Economic & Policy Outlook:

New Zealand’s economy showed signs of stabilization in 2025 after a technical recession, helped by strong migration and resilient commodity exports. The RBNZ remained one of the more hawkish central banks early on but eased policy in the second half as inflation cooled faster than expected, leading to tempered NZD gains. This divergence supported initial outperformance but faded later. In 2026, the RBNZ may pause cuts if commodity prices rebound, offering NZD some support.

Technical View:

NZD/USD broke above key resistance at 0.6100 in mid-year but retraced the whole move back to 0.5600 by November, closing near 0.6050. Momentum has weakened, with MACD signaling potential consolidation and next resistance at 0.5900 followed by 0.6000. Support lies at 0.5600 followed by 0.5450. The pair continues to track broader risk-on flows and commodity trends.

CAD – Canadian Dollar

Economic & Policy Outlook:

The Canadian economy slowed in 2025, with tepid GDP growth and rising unemployment, prompting the Bank of Canada to cut rates in June and follow up with additional easing later in the year. The BoC emphasized a gradual path and kept the door open to pausing if inflation flared. Oil prices were supportive but not dominant in the CAD narrative, with second-half softening contributing to modest gains overall. For 2026, tariff risks appear overblown, with an anticipated Supreme Court ruling likely to limit U.S. tariff impacts on Canada, bolstering commodities and global growth. Strong commodity momentum, resilient consumer spending driven by demographics, and positive USMCA developments, where the U.S. is expected to remain engaged, support further CAD strength. Political stability under the Carney government favors natural resources, enhancing investment appeal. However, ongoing housing challenges persist, though consumer response has been limited.

Technical View:

USD/CAD started the year around 1.44 and surged close to 1.48 in Feburary. It then turned on a dime and moved to 1.36 by June. A retrace to near 1.4150 ensued until the Fed cut rates in November which caused the USD/CAD pair to close near 1.3650 at year-end. Support comes in at 1.36 followed by 1.3450, and 1.32. Resistance sits near 1.3825 and 1.40. The pair is tracking U.S. yields closely, and a dovish Fed combined with resolved tariff uncertainties could push USD/CAD toward 1.30 by year-end, implying another 5% rally in the loonie.

AUD – Australian Dollar

Economic & Policy Outlook:

Australia’s economy held up better than expected in 2025, and the RBA maintained a hawkish bias, warning of upside inflation risks. Housing prices remained firm, and the labor market showed few signs of weakness. With China’s stimulus showing traction in the second half, the AUD received an additional tailwind. Heading into 2026, continued commodity strength could bolster the AUD if global demand holds.

Technical View:

AUD/USD broke down to around 0.60 level after starting the year at 0.62, it then ralled to near 0.67 by year-end. A decisive move above 0.68 opens the path to 0.6940, followed by 0.72. Key support remains at 0.66 and 0.6425. The pair is increasingly tracking equity market risk sentiment and commodity flows, particularly iron ore.

Emerging Market Currencies

A likely secular decline in the USD can be spotted when emerging market currencies break through major resistance levels. USD downturns tend to be prolonged and broad, often fueling rallies in metals, commodities, and foreign currencies, as seen in the 1970s and early 2000s.

Does this signal the USD losing its reserve currency status? Unlikely, given the unmatched depth of the U.S. bond market. However, it may further erode the USD’s dominance, paving the way for a more multipolar currency system, with the euro and Chinese yuan gaining prominence.

Final Takeaway

The broad selloff in the USD during 2025 underscores the power of monetary policy divergence and global macro resilience. While much will hinge on the Fed’s path forward and the impact of new fiscal measures, near-term momentum favors consolidation following an over-extended decline. Longer-term, renewed USD weakness remains our base case unless growth or inflation surprises bring the Fed back into play. As always, volatility and headline risk will remain elevated, and positioning into 2026 requires both discipline and flexibility.