Insights 
VT 
Following a strong run for the dollar and fresh highs in equity markets, traders are once again weighing whether momentum pauses or extends further.
The current US administration has increasingly framed economic and national security as part of the same strategy, treating tariffs, energy security and defence spending as interconnected levers rather than standalone policies.
Since 2025, tariff receipts are estimated to have generated between USD 250 billion and USD 270 billion, helping to finance domestic support initiatives while safeguarding industrial capacity.
Economic growth has remained robust. US GDP is estimated at around 4.3% in the third quarter of 2025, accelerating to roughly 5.4% in the fourth. This resilience has underpinned dollar strength and reduced the urgency for aggressive rate cuts, even as inflation pressures continue to ease.
Labour Data Underpins Dollar Support
Last week’s US labour market report sent mixed signals. Non-farm payrolls rose by 50,000 in December, undershooting expectations and pointing to a moderation in hiring momentum heading into the new year.
The unemployment rate dipped to 4.4%, while average hourly earnings increased by 0.3% month on month, keeping annual wage growth close to 3.8%.
This blend of slower job creation and firm wage growth left the dollar supported, but tempered confidence around imminent policy shifts.
The data pushed back against near-term rate cut expectations and fuelled broad-based demand for the dollar into the weekly close, most notably against the euro and the yen.
Energy Helps Keep Inflation in Check
Energy markets remain central to the broader macro picture. Rising US shale output, combined with renewed supply from Venezuela, has helped contain oil price volatility, easing inflationary pressures while limiting OPEC’s ability to exert pricing control.
For traders, this reduces the likelihood of energy-driven inflation shocks in the near term, reinforcing a market environment that favours range trading over defensive positioning.
The dollar continues to benefit. With a large share of global energy trade still settled through US channels, demand for dollar liquidity remains structurally strong.
This provides underlying support for the greenback, even as short-term moves remain sensitive to CPI and PPI releases. Risks persist, including legal challenges to tariff authority and longer-term de-dollarisation efforts. But these are more relevant to the medium-term outlook than immediate trading setups.
Against this backdrop, incoming inflation data takes on greater importance.
A stable CPI reading would reinforce the narrative of orderly disinflation within a solid growth and fiscal framework, keeping markets inclined towards consolidation rather than abrupt reversals.
Market Movements Of The Week
US Dollar Index (USDX)
– The dollar climbed all week and closed near the 99.10 resistance zone.
– Consolidation could open pullbacks toward 98.20 or 97.95.
– A break higher places focus on the 99.70 area.
Gold (XAUUSD)
– Gold pushed above the 4,500 swing high, extending the bullish structure.
– Follow-through above 4,550 would keep momentum intact.
– Failure to hold recent gains may invite short-term profit-taking.
S&P 500
– The index printed a fresh all-time high.
– Upside extension targets sit near 7,000 and 7,050.
– Traders may watch for slowing momentum after the strong run.
Bitcoin (BTCUSD)
– Bitcoin continues to trade within a wide range.
– 84,445 remains a key downside level to defend.
– Rallies toward 98,730 may face renewed selling pressure.
Key Events This Week
13 January
1. US CPI y/y, Forecast: 2.70%, Previous: 2.70%
Directional driver for USD and risk sentiment.
14 January
1. US PPI m/m, Forecast: NA, Previous: 0.30%
Focus on pipeline inflation pressure.
15 January
1. UK GDP m/m, Forecast: 0.00%, Previous: -0.10%
Growth data may impact sterling volatility
Summary
This week’s US CPI release is likely to determine whether recent trends continue or pause, particularly after a strong start to the year for both the dollar and US equities.
A steady inflation outcome would support the view that disinflation remains controlled rather than signalling a sharp economic slowdown, helping to anchor policy expectations and contain volatility.
With inflation, growth and policy narratives tightly intertwined, the upcoming data may decide whether markets pause to absorb gains or find scope to extend them further.
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