USD resurgence threatened by cooling Iran tensions

Matthew Ryan, CFA Ebury

The dollar has snapped back so far in 2026 amid a combination of a rising geopolitical risk premium and expectations that the Fed will hold off from cutting rates again for at least the next couple of FOMC meetings.

Yesterday’s jobs data remained consistent with the “low hire, low fire” narrative. Initial jobless claims sank to just 198k in the week to 10th January, well below the 215k forecast. So far at least, we are not seeing enough evidence that would suggest that the jobs market is in desperate need of further monetary accommodation, as while job creation in soft, there has been no real evidence of an increase in layoffs.

Chicago Fed President Goolsbee effectively said as much on Thursday, as he noted that stability in the labour market meant that the focus was on bringing down US inflation.

It will be interesting to see whether the dollar resurgence continues in the next few days, as recent rhetoric suggests that geopolitical tensions in Iran are dying down, which should be a dollar negative.

Today is a relatively quiet day in terms of US data, so geopolitical news could remain the number one driver of the greenback for at least the next few trading sessions.

Author

Matthew Ryan, CFA

Ebury

Matthew is Global Head of Market Strategy at FX specialist Ebury, where he has been part of the strategy team since 2014. He provides fundamental FX analysis for a wide range of G10 and emerging market currencies.

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