USD weaker as US Fed Chairman faces subpoenas & weak employment data

USD weakened further as Federal Reserve Chairman faces charges, to which he responded with a statement accusing the US government of trying to force the US Fed to cut rates - essentially making interest rate policy a political weapon, not a decision made by an independent body. Plenty of speeches and data ahead this week.

USD:
From UOB regarding last week’s weak employment data:
"December’s US jobs report provided two downside surprises as US reported just 50,000 jobs gained (missing Bloomberg median of 70,000) while prior month revisions saw a further 76,000 declines. Unemployment rate expectedly fell to 4.4% (Nov: 4.5%), while employment growth averaged 49,000 monthly in 2025, versus 2024’s 168,000."

This all points to further weakening of the USD, which accelerated as the Department of Justice subpoenaed Fed Chairman Powell, who accused the government of wanting to pile pressure onto the central bank to lower rates.

EUR/USD gained, approaching 1.1700 after trading under 1.1500 in early Nov25. GBP/USD trading near 1.3500 is near the highest level of the last 3 months. Tomorrow’s inflation data will be the one to watch, alongside a lot of Fed speeches.

GBP:
GBP will wait for tomorrow’s data and the current situation is neatly laid out below, and doesn’t give much of a positive outlook:
”Tuesday’s employment report will provide insight into the Bank of England’s (BoE) next monetary policy steps.

A recent report by the UK Recruitment & Employment Confederation and KPMG reveals that hiring plans among UK employers fell in December at their fastest rate since August, amid rising costs and Labour’s tax-raising budget. In this context, the risk is on a weaker-than-expected employment report that might raise speculation about further BoE easing and add pressure on GBP.”

The Bank of England cut rates by 0.25% to 3.75% and markets currently expect one 0.25% cut in the first half of 2026. This is due to Inflation (CPI) reading at 3.2% (far above the 2% target) being stubbornly high which justifies higher rates.

EURO:  
EUR is still suffering due to the war in Ukraine, but may gain support from the central bank’s ‘wait-and-see’ stance on interest rate cuts. Another strong point for the EURO was the Eurozone Confidence Index which hit a six-month high in January - although the reaction was muted, if positive data continues, it will bolster the single currency. GBP/EUR held on to trade above 1.1500 after December’s decline.

Elsewhere:
Canada: EUR/CAD rising above 1.6200 based on a stronger euro and a weak CAD. The CAD is looking for support, but Canada’s Employment rose by just 8,000 in December after a strong 181,000 increase over the previous three months. The unemployment rate climbed to 6.8% from 6.5%, mainly reflecting a larger share of people entering the labor force rather than increased layoffs However, as CAD is linked so strongly to commodity prices, it may strengthen as oil prices climb due to tensions in Iran and Venezuela which might stifle global supply.

This weeks data:
Today:
USA: Fed speeches / Inflation data

Wednesday:
China: Import & Export data
USA: Retail Sales / Producer Inflation data / Fed speeches

Thursday:
Australia: Inflation data
US: Trade data / Employment / Fed speeches
UK: GDP / Manufacturing data
EU: Industrial Production
France: Inflation data
Germany: Inflation data

Friday:
Germany: Inflation data
USA: Industrial Production data / Fed speeches