The US Dollar strengthened late Wednesday after hawkish language in the Federal Reserve’s January meeting minutes. The US calendar includes December Goods Trade Balance data and weekly Initial Jobless Claims. Markets are also watching geopolitical developments. The minutes said the Fed is not acting with a one-way bias. Several officials wanted more balanced wording for future decisions. The minutes also said more rate rises could be appropriate if inflation stays above target. The USD Index rose more than 0.5% to near 97.80, then held around 97.70.

Geopolitical Tensions And Market Pricing

CBS News reported that the US military is preparing for possible strikes on Iran as soon as Saturday. It said the USS Abraham Lincoln carrier group is already in the region, and the USS Gerald Ford is on its way to the Middle East. Gold traded above $5,000. Australia’s unemployment rate held at 4.1% in January, better than the 4.2% forecast. Employment rose by 17.8K versus a 20K estimate. AUD/USD traded above 0.7050. New RBNZ Governor Anna Breman said policy will adjust if the inflation outlook changes, to bring inflation back to target. NZD/USD rebounded to about 0.5980, up more than 0.3% after falling over 1% on Wednesday. EUR/USD fell about 0.6% on Wednesday, then traded near 1.1800 early Thursday. GBP/USD dropped over 0.5% to 1.3480, then recovered toward 1.3500. USD/JPY traded near 155.00 after rising almost 1%. At this time in 2025, a hawkish Fed boosted the US Dollar because markets feared inflation would stay high. Now the picture is different. The Fed is holding rates steady, and the latest CPI data from January 2026 shows inflation at 2.9%. This means options tied to a surprise rate cut could turn more volatile, even if the dollar stays relatively strong.

Key Takeaways For Traders Right Now

A year ago, direct military threats against Iran pushed Gold to extreme highs and created a large geopolitical premium. Today, tensions remain, but the immediate threat has faded. Gold is much lower, around $2,150 an ounce. Traders should be careful about overpaying for Gold call options based on headlines, because the market is less reactive than it was in 2025. Weekly jobless claims were a key market focus then, and they still matter for judging economic strength. The latest reading shows initial jobless claims at 212,000. That is still low by historical standards and points to a resilient labor market. This strength gives the Fed room to delay rate cuts, which could weigh on equity index futures in the coming weeks. In February 2025, the dollar was rising fast against the yen and was pushing toward 155 because of the Fed’s stance. Now USD/JPY is lower, near 150. But the risk of intervention by Japanese authorities feels more immediate than it did then. Traders may want to consider cheap, out-of-the-money puts on USD/JPY as a hedge against sudden government action. Last year, the euro and sterling struggled against a broadly rising dollar. The dollar’s momentum has slowed, but recent data suggests inflation in Europe is still sticky. The Bank of England is also still signaling caution. This gap could make cross-currency trades, such as EUR/GBP, clearer than simply betting against the US Dollar. Create your live VT Markets account and start trading now.

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