The US dollar extended its retreat for a second straight session, as traders continued to reassess the outlook for US monetary policy following fresh signs of cooling economic momentum. Currency markets are increasingly positioning for further Federal Reserve easing, with attention now firmly fixed on a dense run of US labor and activity data.In rates, US Treasuries gave back part of Monday’s rally. The benchmark 10-year yield edged up toward the 4.18% area after declining in the prior session, when data showed US manufacturing activity contracted in December at the fastest pace since 2024. That report strengthened the argument that restrictive policy is weighing more heavily on growth, reinforcing expectations that the Fed’s easing cycle is not yet complete.
Commodity markets remain highly sensitive to both macro signals and geopolitical risk. Precious metals reversed early losses, with gold regaining ground above the $4,460 level while silver outperformed sharply. The move builds on Monday’s gains, when safe haven demand was sparked by political developments in Venezuela, and highlights how quickly investors are rotating back into metals on any sign of uncertainty.
Oil prices stabilized after their strongest advance in a week, suggesting energy markets are pausing to assess whether recent geopolitical headlines will translate into meaningful supply risks. For now, the focus remains on demand expectations tied to global growth and US economic data.
Looking ahead, this week’s data flow will be critical for near term market direction. In addition to the December employment report, traders will be closely watching US job openings, quits and layoffs figures for insight into labor market slack. Later in the week, housing starts and the University of Michigan’s preliminary consumer sentiment reading will add further context to the health of domestic demand.
With the Fed having already delivered three consecutive rate cuts in response to a softening labor market, markets are increasingly confident that further easing lies ahead in 2026. Whether that view is reinforced or challenged will depend squarely on the data in the days ahead.
Key Focus for Traders
- USD: Ongoing softness reflects growing conviction in further Fed easing
- US Yields: Short term pullback gives way to consolidation ahead of data
- Gold & Silver: Renewed upside as macro and geopolitical hedging returns
- Oil: Pausing after sharp gains, demand outlook back in focus
- US Data: Jobs, JOLTS, housing and sentiment will drive positioning
Markets are shifting back to a data driven regime. Dollar weakness and firm precious metals signal rising confidence in further Fed cuts, but confirmation now rests on this week’s labor and activity data. Traders should stay nimble, avoid chasing moves ahead of key releases, and be prepared for volatility as expectations around US growth and policy are tested.