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12/01/2026 - 08:22 UTCThe USDX dipped toward 99.00 during Monday's Asian session, halting a four-day rally despite having gained 0.71% over the last week. Market caution has intensified following reports that federal prosecutors have opened a criminal investigation into Fed Chair Jerome Powell. The inquiry focuses on the multi-billion dollar renovation of the Federal Reserve’s Washington headquarters and allegations regarding whether Powell provided misleading testimony to Congress about the project's scope. Powell has characterized the investigation as a "pretext" aimed at undermining the central bank's independence, suggesting the legal pressure is a direct result of the Fed’s resistance to the administration's demands for more aggressive interest rate cuts.
The Greenback faces further pressure as investors reassess the outlook for Federal Reserve policy in 2026. Recent data showed that Nonfarm Payrolls added only 50,000 jobs in December, missing the anticipated 60,000, which has fueled expectations for future rate cuts even as the unemployment rate improved to 4.4%. While the CME FedWatch Tool indicates a 95% probability that rates will remain unchanged at the upcoming January meeting, the USDX may find underlying support from heightened geopolitical risks. Tensions remain elevated as the U.S. monitors developments in Tehran and considers increasing its military presence in Greenland to secure Arctic interests, keeping the currency sensitive to both domestic legal developments and global stability.
General Asia news remained cautiously optimistic on Monday as technology shares, particularly those in the artificial intelligence sector, led a regional rally. While market sentiment was bolstered by a positive lead from Wall Street and strong performance from Chinese "AI tigers" debuting in Hong Kong, overall gains were tempered by a complex geopolitical landscape. Investors are currently weighing risks ranging from the U.S. government probe into the Federal Reserve to ongoing diplomatic tensions between China and Japan, alongside political developments regarding Greenland and Venezuela. As of 08:04 AM GMT Monday, the China SSE rose 1.09% and the China SZSE climbed 1.73%. These gains were supported by robust annual revenue data from the semiconductor industry, though broader mainland bourses continue to navigate domestic economic adjustments against the backdrop of international trade frictions.
The Hong Kong 50 advanced 1.18% as of 08:04 AM GMT Monday, primarily driven by the tech sector's momentum. Meanwhile, the Japan 225 edged up 0.03% in a session characterized by subdued volumes due to a local market holiday. Despite the quiet session in Tokyo, the index managed to maintain its positive trajectory after leading regional gains during the first week of 2026.
US and individual stocks showed varied results following the latest payroll data. On Friday, the Taiwanese semiconductor giant TSMC rose 1.74%, while Nvidia slipped -0.15% as investors recalibrated positions following new chip unveilings at the CES trade show. Looking ahead, the main US equity indices face potential volatility as futures declined in response to concerns over central bank independence and the upcoming release of key inflation and retail data.
In the week ahead, market focus shifts to a heavy slate of top-tier economic data and corporate guidance that will likely dictate the next direction for the USDX and global equity markets. Investors will closely monitor the U.S. Consumer Price Index (CPI) and Producer Price Index (PPI) for December to gauge whether inflationary pressures are cooling enough to support the Federal Reserve's 2026 easing path, while the Retail Sales report will provide a critical update on the resilience of the American consumer. Simultaneously, the fourth-quarter earnings season begins with major reports from the financial sector and a high-stakes update from TSMC, which will serve as a vital barometer for global semiconductor demand and the ongoing artificial intelligence boom.
The EUR/USD pair rose early on Monday trading above the 1.1650 level. The pair is supported by renewed weakness in the US Dollar, driven by growing expectations that the Federal Reserve will maintain a cautious, dovish stance on monetary policy.
Friday’s US labor market data reinforced this view, as job growth came in below expectations. Nonfarm Payrolls increased by 50,000 in December, down from November’s revised gain of 56,000 and short of the 60,000 consensus forecast. Slower hiring has fueled speculation that the Fed may keep interest rates unchanged at its upcoming meeting.
Despite softer payroll growth, other labor indicators showed resilience. The Unemployment Rate edged down to 4.4% from 4.6%, while Average Hourly Earnings rose 3.8% year-on-year, accelerating from the prior 3.6% reading. Richmond Fed President Tom Barkin welcomed the decline in unemployment, describing employment growth as moderate but steady.
On the European side, the Euro faces potential headwinds as inflation across the Eurozone continues to cool, reducing expectations for further tightening by the European Central Bank. Headline inflation slowed to 2.0% in December, marking a four-month low and aligning with the ECB’s target. Core inflation also eased to 2.3%, slightly below market forecasts.
Meanwhile, geopolitical developments have drawn attention to Europe’s northern frontier. According to Bloomberg, several European countries—led by the United Kingdom and Germany—are in discussions to expand their military presence in Greenland to enhance Arctic security. These talks come amid renewed remarks from US President Donald Trump advocating US ownership of Greenland.
Bitcoin posted modest gains during Asian trading on Monday, holding close to last week’s levels as investor sentiment remained fragile amid rising tensions between US President Donald Trump and the Federal Reserve. Persistent geopolitical uncertainty and caution ahead of key US economic data releases further limited risk-taking across markets.
Bitcoin underperformed a rally in global technology stocks, which were lifted by improving sentiment surrounding artificial intelligence. While Bitcoin has historically moved in tandem with tech equities, this correlation has weakened over the past year. The absence of supportive drivers for digital assets has kept Bitcoin trading broadly subdued through late 2025 and early 2026.
Risk appetite took another hit following comments from Federal Reserve Chair Jerome Powell, who revealed that the central bank had been subpoenaed by the US Department of Justice and could face a potential criminal indictment related to the renovation of its headquarters. Powell described the investigation as politically motivated, pointing to repeated pressure from the Trump administration for aggressive interest rate cuts.
Markets grew increasingly concerned that escalating friction between the White House and the Fed could undermine the central bank’s independence, particularly as President Trump is expected to nominate Powell’s successor in the near term.
Geopolitical risks added to investor caution. Trump reiterated calls for the US to assume control of Greenland, a scenario that gained greater attention following Washington’s recent incursion into Venezuela.
Oil prices inched higher on Monday as escalating protests in Iran raised concerns over potential supply disruptions from the OPEC producer. However, expectations of ample global supply later this year and the prospect of Venezuelan exports returning to the market limited further upside.
Both benchmarks advanced more than 3% last week, marking their strongest weekly performance since October. The gains followed an intensifying crackdown by Iran’s clerical leadership on the country’s largest wave of protests since 2022, heightening geopolitical risk premiums in oil markets.
Despite recent price support, analysts warn that markets may still be underestimating the potential fallout from a broader escalation involving Iran.
US President Donald Trump has repeatedly warned of possible intervention should force continue to be used against protesters. A US official told Reuters that Trump is expected to meet with senior advisers on Tuesday to review policy options related to Iran.
Offsetting these concerns, attention has turned to Venezuela, where oil exports are expected to resume following the removal of President Nicolas Maduro. Trump said last week that the new government in Caracas plans to transfer up to 50 million barrels of previously sanctioned oil to the United States.
Investors are also monitoring potential supply risks linked to Russia, amid continued Ukrainian attacks on Russian energy infrastructure and the possibility of tougher US sanctions targeting Russian energy exports.
US equities ended Friday on a strong note, with the US 500 posting a record closing high, driven by gains in Broadcom and other semiconductor stocks. A weaker-than-expected US jobs report did little to disrupt expectations that the Federal Reserve will begin cutting interest rates later this year.
All three major Wall Street indexes recorded solid gains during the first full trading week of 2026. The advance was supported by strength in materials, industrials and other cyclical sectors that have lagged technology shares in recent years.
In corporate news, Intel rallied nearly 11% after President Donald Trump said he had a “great meeting” with the chipmaker’s chief executive, Lip-Bu Tan.
In policy developments, the US Supreme Court declined to issue a ruling on Friday regarding the legality of President Trump’s sweeping tariffs, leaving investors awaiting clarity. Market participants expect volatility to increase should the tariffs ultimately be struck down.
Mortgage-related stocks also rallied after Trump said he directed representatives to purchase $200 billion in mortgage bonds in an effort to lower housing costs.
Elsewhere, General Motors shares fell more than 2% after the automaker announced it would take a $6 billion charge related to the unwinding of certain electric-vehicle investments.
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