Markets delivered post-inflation action on Tuesday with equities pulling back modestly, and Bitcoin strengthening after December’s cooler-than-expected CPI data reinforced hopes for Federal Reserve rate cuts in 2026, while geopolitical tensions surrounding Iran and fresh tariff threats added volatility across commodity markets.
Check out the forex news and economic updates you may have missed in the latest trading session!
Forex News Headlines & Data:
- Australia Westpac Consumer Confidence Change for January 2026: -1.7% (2.6% forecast; -9.0% previous)
- Japan Bank Lending for December 2025: 4.4% y/y (4.1% y/y forecast; 4.2% y/y previous)
- Japan Current Account for November 2025: 3,674.0B (3,300.0B forecast; 2,834.0B previous)
- U.K. BRC Retail Sales Monitor for December 2025: 1.0% y/y (0.9% y/y forecast; 1.2% y/y previous)
- Japan Eco Watchers Survey Outlook for December 2025: 50.5 (50.5 forecast; 50.3 previous)
- U.S. NFIB Business Optimism Index for December 2025: 99.5 (99.3 forecast; 99.0 previous)
- U.S. ADP Employment Change Weekly for December 20, 2025: 11.75k (11.5k previous)
- Canada Building Permits for November 2025: -13.1% m/m (-6.8% m/m forecast; 14.9% m/m previous)
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U.S. CPI Growth Rate for December 2025: 2.7% y/y (2.6% y/y forecast; 2.7% y/y previous); 0.3% m/m (0.2% m/m forecast)
- U.S. Core CPI Growth Rate for December 2025: 2.6% y/y (2.6% y/y forecast; 2.6% y/y previous); 0.2% m/m (0.2% m/m forecast)
- U.S. Building Permits Final for October 2025: -0.3% m/m (0.7% m/m forecast; 6.4% m/m previous)
- U.S. New Home Sales for October 2025: -0.1% m/m (1.4% m/m forecast; 3.8% m/m previous)
- U.S. Monthly Budget Statement for December 2025: -145.0B (-250.0B forecast; -173.0B previous)
Broad Market Price Action:
Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView
Tuesday’s session reflected a careful balancing act as markets digested December’s inflation data that came in cooler than expected on core measures, yet showed persistent price pressures in key consumer categories.
Bitcoin emerged as the session’s standout performer, surging 3.77% to close near $94,400. The cryptocurrency’s sharp rally appeared to correlate with a broader risk-on sentiment following the softer core CPI reading, which traders seem to have interpreted as supportive of potential Federal Reserve rate cuts in 2026 despite the headline inflation figure matching expectations. The rally extended through the U.S. session, possibly also reflecting renewed institutional interest in digital assets.
WTI crude oil climbed 2.34% to settle around $60.80 per barrel, marking a significant reversal from recent weakness. The energy complex caught a strong bid following President Trump’s Monday evening announcement of a 25% tariff on any country conducting business with Iran, raising concerns about potential supply disruptions from the OPEC member nation that exports nearly 2 million barrels per day. The move came as Trump intensified pressure on Tehran amid widespread anti-government protests, with additional warnings of possible military intervention adding to geopolitical risk premium. Oil had traded relatively flat through Asian and London sessions before rallying sharply in afternoon U.S. trading on the tariff news.
U.S. equities declined modestly, with the S&P 500 falling 0.16% to close around 6,963. The index initially climbed during the early U.S. session following the 8:30 am ET CPI release, which showed core inflation rising just 0.2% month-over-month—below the 0.3% consensus—reinforcing the 2.6% year-over-year pace that matches a four-year low. However, gains proved short-lived as financial sector weakness dragged on the broader market. JPMorgan Chase reported fourth-quarter results that beat earnings expectations but disappointed on revenue, with the stock declining more than 4% and setting a cautious tone for bank earnings season. Additional pressure came from President Trump’s recent proposal to cap credit card interest rates at 10%, which sparked concerns about profitability margins at consumer-facing lenders and contributed to selling pressure in financials.
Gold edged marginally lower, declining 0.19% to trade around $4,589. The precious metal traded in a relatively narrow range through Asian hours before experiencing modest volatility during the London session coinciding with the UK retail sales data. Gold pulled back further during the U.S. afternoon despite the softer core CPI reading that would typically support non-yielding assets, suggesting profit-taking after recent strength or positioning adjustments ahead of the Federal Reserve’s January 27-28 meeting may have dominated price action.
Treasury yields declined 0.10% with the 10-year note settling around 4.18%. Yields initially dropped following the 8:30 am ET CPI release, with the cooler-than-expected core reading prompting bond buyers to emerge. However, the move proved relatively modest compared to equity market reactions, likely reflecting market expectations that the Federal Reserve will maintain its cautious stance at the upcoming January meeting. Following the data, traders increased expectations for rate cuts in 2026, with approximately 95% odds now priced for the Fed to hold steady in January but growing conviction of at least two 25 basis point cuts later in the year.
FX Market Behavior: U.S. Dollar vs. Majors
Overlay of USD vs. Majors Forex Chart by TradingView
The U.S. dollar traded with net choppy and mixed price action on Tuesday, ultimately closing with a bullish lean against most major currencies as geopolitical developments and safe-haven demand appeared to outweigh the dovish implications of softer core inflation data.
During the Asian session, the dollar traded with arguably a net bearish lean against the major currencies, possibly reflecting overnight positioning ahead of the critical U.S. CPI release scheduled for 8:30 am ET. The moves were relatively muted across currency pairs, with no significant regional economic catalysts to drive clear directional momentum. Japanese data showed stronger-than-expected bank lending and current account figures, yet the yen remained under pressure as traders likely maintained cautious positioning on rumors that Prime Minister Sanae Takaichi may be preparing to dissolve the lower house and call a snap election in early February.
The London session brought modest dollar strength early on, with the greenback maintaining its slightly bullish bias through European trading hours. UK retail sales data came in roughly in line with expectations at 1.0% year-over-year, providing limited direction for sterling. The euro traded defensively amid ongoing concerns about European growth momentum, though moves remained choppy and range-bound as traders awaited the U.S. data. The dollar’s performance during London hours suggested market participants were positioning for potential volatility around the upcoming CPI release rather than reacting to European developments.
The U.S. session opened with immediate volatility following the 8:30 am ET CPI release. The December data showed headline inflation at 2.7% year-over-year as expected, but the core reading of 2.6% annually—matching November’s pace—came with a monthly gain of just 0.2%, undershooting the 0.3% consensus. The dollar initially weakened on the softer core figure as traders increased expectations for Federal Reserve rate cuts in 2026, with the data reinforcing hopes that underlying inflation pressures are moderating. However, the greenback’s losses proved short-lived.
The dollar reversed course and strengthened through the afternoon U.S. session, ultimately closing with a net bullish lean against most major currencies. This turnaround appeared may have been a return in focus to President Trump’s Monday evening announcement of 25% tariffs on countries conducting business with Iran, which sparked fresh geopolitical uncertainty and likely triggered safe-haven flows into the dollar. The greenback posted particularly strong gains against commodity-linked currencies including the Australian and New Zealand dollars, while also strengthening modestly against the franc and yen.
At Tuesday’s close, the dollar traded net higher against all major currencies, with traders appearing to prioritize geopolitical risk considerations and safe-haven positioning over the inflation data’s dovish implications. The combination of Iran-related tensions, Trump’s tariff threats, and concerns about the banking sector’s earnings outlook appeared to support the greenback despite growing expectations for Fed rate cuts later in 2026.
Upcoming Potential Catalysts on the Economic Calendar
- U.S. API Crude Oil Stock Change for January 9, 2026 at 9:30 pm GMT
- New Zealand Building Permits for November 2025 at 9:45 pm GMT
- Australia Building Permits Final for November 2025 at 12:30 am GMT
- China Balance of Trade for December 2025 at 3:00 am GMT
- Japan Machine Tool Orders YoY for December 2025 at 6:00 am GMT
- U.K. BoE Taylor Speech at 8:00 am GMT
- Euro area ECB Guindos Speech at 8:20 am GMT
- China Monetary Developments for December 2025
- U.S. MBA Mortgage Applications for January 9, 2026 at 12:00 pm GMT
- U.S. PPI for November 2025 at 1:30 pm GMT
- U.S. Retail Sales for November 2025 at 1:30 pm GMT
- U.S. Current Account for September 30, 2025 at 1:30 pm GMT
- U.S. Fed Paulson Speech at 2:50 pm GMT
- U.S. Retail & Business Inventories for October 2025 at 3:00 pm GMT
- U.S. Existing Home Sales for December 2025 at 3:00 pm GMT
- U.S. Fed Miran Speech at 3:00 pm GMT
- U.K. BoE Ramsden Speech at 3:30 pm GMT
- U.S. EIA Crude Oil Stocks Change for January 9, 2026 at 3:30 pm GMT
- U.S. Fed Bostic Speech at 5:00 pm GMT
- U.S. Fed Kashkari Speech at 5:00 pm GMT
Wednesday’s calendar features critical catch-up data releases following the government shutdown that paralyzed reporting in late 2025. The Producer Price Index for November—originally scheduled weeks ago—arrives at 1:30 pm GMT alongside delayed retail sales and current account figures, providing a fuller picture of economic conditions heading into year-end. These reports could spark volatility if they reveal unexpected weakness or strength that wasn’t captured in the already-released consumer inflation data.
The session also brings a dense lineup of Federal Reserve speakers including Barkin, Paulson, Miran, Bostic, and Kashkari. Following Tuesday’s softer core CPI reading, markets will scrutinize their commentary for signals about the pace and timing of potential rate cuts in 2026, particularly given the Fed’s January 27-28 meeting approaches. Any divergence in messaging among officials could drive significant moves in rate expectations and currency markets.
Energy markets remain sensitive to developments around President Trump’s Iran tariff announcement and geopolitical tensions in the Middle East. The API and EIA crude inventory reports will be closely watched for any signs of supply disruption concerns or demand shifts, with traders balancing actual stockpile changes against the risk premium introduced by escalating U.S.-Iran tensions and the potential impact of 25% tariffs on Iran’s trading partners.
Stay frosty out there, forex friends, and don’t forget to check out our Forex Correlation Calculator when planning to take on risk!
