The year 2026 began without any warm-up. As soon as the champagne had been poured into New Year's glasses, geopolitical shocks rattled markets due to the abduction of Venezuela's president by US special services and an open demand to "cede Greenland." Besides, news emerged that Fed Chair Jerome Powell was under investigation by the US prosecutor's office.

Although the investigation concerns a fairly mundane issue related to the renovation of the Federal Reserve's Washington headquarters, there is little doubt that the real reason for the pressure on Powell lies in the Trump administration's intention to push the Federal Reserve into cutting interest rates. Jerome Powell is known for his cautious stance on interest rates, and this clearly does not suit Trump.

Such news is bearish for the US dollar and bullish for gold, which once again comfortably renewed its all-time high. It is unclear whether the US dollar will be able to strengthen, as the labor market report released on Friday showed that employment problems in the US may be far deeper than currently assumed.

Nonfarm payrolls rose by 50,000, slightly below forecasts, while figures for the previous two months were revised downward by 76,000. As a result, a total of 67,000 jobs were lost in the fourth quarter. Since April, employment outside agriculture and healthcare has fallen by approximately 354,000. Given such data, it is hard to seriously argue that the US economy is growing confidently.

What is clear, however, is that Trump may be more right than wrong: the current labor market situation appears even more important than still-elevated inflation and represents a powerful incentive to cut rates faster—possibly as early as January. Markets currently price in two rate cuts this year, in June and September, while January expectations imply a 95% probability that rates will remain unchanged. This confidence has helped the dollar hold its ground—but what if the market ultimately takes the employment situation into account?

For now, markets are operating under forecasts that US GDP will grow at around 2% this year, rates will be cut twice, and 10-year Treasury yields will remain near current levels. Such a scenario implies stability. However, as we can see, pressure on the Federal Reserve is intensifying, while the labor market is calling GDP growth prospects into question. The CFTC report showed that investors remain bearish on the dollar: over the week, the aggregate short position in dollars against major global currencies increased by $1.3 billion to -$11.9 billion. This imbalance is driven almost entirely by one currency—the euro—where the long position reached $23.8 billion. Against other currencies, except the yen and the Mexican peso, the dollar looks slightly stronger, but this advantage is minimal.

In other words, the key factors that could influence the dollar's exchange rate currently appear more negative than positive. Inflation has so far remained outside the focus, as price growth has not materialized in recent months despite fears that new tariffs would push prices higher. These concerns were based on calculations suggesting that higher tariffs would inevitably be passed on to consumers, as large companies could only partially offset tariffs through reduced profits and some optimization, leaving the main burden to fall on consumers.

On Tuesday, the December consumer inflation report will be released, followed by producer prices and retail sales for November on Wednesday. If inflation shows signs of slowing, pressure on the Fed is likely to intensify, making markets revise forecasts for interest rates, thus increasing pressure on the US dollar. If inflation comes in above expectations, market reaction could be even more unpredictable but would most likely result in a stronger dollar against commodity currencies, its weakness against the yen, and another record high in gold.