Forex Today: US Dollar on the backfoot as optimism persists

Valeria Bednarik FXStreet

What you need to take care of on Tuesday, December 28:

The US Dollar extended its Friday slide, ending Tuesday with modest losses against most major rivals. Softening US inflation, as per data released last week, coupled with Chinese news to boost the market sentiment after a long weekend.

China upwardly revised its Gross Domestic Product (GDP) estimate for 2021, bringing it up to 8.4% from 8.1%. Additionally, the government continues to ease covid-related restrictions, which will mitigate the negative impact limitations had on the economy. Finally, the China Immigration Administration announced it would resume issuing visas for mainland citizens travelling abroad.

Global stocks were supported by speculation the Chinese government would focus on boosting growth and move further away from its covid-zero policy. Wall Street traded mixed, with the DJIA up, but the Nasdaq Composite is shedding roughly 100 points.

On a down note, Russian President Vladimir Putin signed a decree that bans the sale of Russian oil to countries that imposed the oil price cap. It will run from February 1 to July 1. There are reports softening the headline and noting that it does not necessarily imply oil exports to countries with formal bans.

The EUR/USD pair keeps hovering at around 1.0650, while GBP/USD is down to 1.2025. The AUD/USD pair trades in the 0.6730 price zone, while USD/CAD hovers around 1.3520. Easing oil prices weighed on the CAD as the WTI trades at around $79.30 a barrel. Finally, USD/JPY ticked higher and trades at 133.35.

Gold peaked at a fresh 3-week high of $1,833.32 but eased towards its comfort zone at around $1,815 by the end of the day.

Like this article? Help us with some feedback by answering this survey:

Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

GBP/USD extends the drop to 1.3360

GBP/USD builds on Monday’s decline and briefly clinches five-day lows near 1.3360 on Tuesday. Cable’s extra pullback follows the better tone in the Greenback as uncertainty in the Middle East prompts investors to adopt a cautious stance. Meanwhile, an apathetic UK labour market report also collaborates with the selling pressure on the British Pound.

EUR/USD stays offered just above 1.1400

EUR/USD keeps the downtrend well in place for yet another day, challenging the 1.1400 contention zone on Tuesday. The continuation of the selling impulse in spot comes amid decent gains in the US Dollar, which continues to find support in the persistent effervescence surrounding the US-Iran crisis.

Middle East crisis intensifies, Gold up

Gold now seems to have embarked on a consolidative phase below the key $4,100 mark per troy ounce in the latter part of Tuesday’s session. Meanwhile, uncertainty surrounding the Middle East conflict and rising expectations for a hawkish Fed policy outlook are expected to limit the precious metal’s bullish momentum in the near term.

XRP rebounds on rising on-chain activity

Ripple (XRP) ticks up and trades around $1.13 at the time of writing on Tuesday. This rebound aligns with a broader recovery in the cryptocurrency market, attributed to reports that mediators between the United States (US) and Iran are seeking a 10-day cessation of strikes to find a way back to the signed Memorandum of Understanding (MoU).

The Iranian war has again risen

The Iranian war has again risen to the top of the economics factor list. There is no end in sight. Intelligence experts say the current level of offense/retaliation will not change minds in Tehran, while in Washington, Trump fears all-out war, which would mean boots on the ground.

US Dollar mid-year outlook: Exceptional currency, exceptional risks?

The US Dollar enters the second half of 2026 in a markedly different position from a year ago. The King currency has recovered, reflecting persistent US inflation, changing expectations for Fed policy, geopolitical tensions and renewed demand for defensive assets.