Economic Update

12 January 2026

US government investigation into Fed officials adds uncertainty for USD

The weekend announcement that Fed officials, including Chair Jerome Powell, are under DOJ investigation is a concerning development for USD. The subpoenas reportedly relate to Senate testimony on Federal Reserve building renovations. Powell stated in a video that the context involves the Fed’s decision-making on interest rates based on its best assessment for the public.

The US President commented that he had no prior knowledge of the DOJ’s action but criticised Powell’s performance, adding that he was “not very good at the Fed, and not very good at building buildings.” Political interference in central bank operations risks undermining USD credibility, and GBPUSD and EURUSD have rallied following the news.

This distraction shifts focus away from other key developments, including this week’s US data releases, the Supreme Court ruling on tariffs, the expected announcement of Powell’s successor, and multiple Fed speeches. If the investigation continues to dominate headlines, USD pressure could persist. Gold has surged to fresh highs in response. Separately, President Trump suggested ExxonMobil may be excluded from any reopening of Venezuela’s oil market after its CEO called the country “uninvestable.”

Euro Area Sentix confidence and industrial production frame the week

Today's already released Euro Area Sentix investor confidence index for January, reported modest improvement that was larger than consensus expectations. Later in the week, November industrial production figures are due, with expectations for solid growth following strong national data from major economies.

Despite these positives, overall growth remains weak and inflation pressures continue to ease. ECB speeches and the economic bulletin will attract attention, particularly as some Governing Council members have softened their pre-Christmas stance that the rate-cutting cycle is complete. Could this week’s data reinforce doubts about the durability of recovery? For now, market focus remains on the US, but sentiment could shift if Euro Area signals point to a temporary rebound.

UK November activity data in focus – will it disappoint?

UK data releases are limited this week, though today’s REC/KPMG/S&P December jobs report delivered another blow to the government, showing permanent staff placements fell at the fastest pace since August. Temporary hiring also declined, while redundancies and jobseekers increased sharply.

Overnight, the BRC sales monitor for December will indicate whether retail activity rebounded after November’s weakness. Toward the week’s end, monthly activity data for November includes industrial production, services output, and GDP. October posted a small GDP contraction, but consensus expects a modest recovery. Will these figures meet expectations or disappoint again? BOE speakers this week include Andrew Bailey tomorrow and Alan Taylor and Dave Ramsden on Wednesday. With markets pricing a very low probability of a February rate cut, these speeches are unlikely to shift expectations.

Quiet week for Canadian data as USDCAD trades near C$1.39

Following last week’s strong Canadian jobs report, this week offers little domestic data. CAD remains near C$1.39 after rising from the low C$1.37 region at the beginning of the week. Geopolitical developments in Venezuela and Iran could influence oil prices and, by extension, CAD. Protests in Iran raise risks of supply disruption if energy facilities become targets. Will USDCAD continue to climb, or will USD weakness from Fed-related headlines reverse the trend?

USDMXN extends move below 18

The Mexican peso continues to trade below 18, with momentum building toward the next support level near 17.65. US political developments and perceived interference in Fed independence could keep USD under pressure despite resilient US economic data. With no major Mexican releases this week and Banxico unlikely to cut rates in early February, MXN should remain supported.

Author 

Views expressed in this commentary are those of the author, and may differ from your appointed Moneycorp representative. This commentary does not constitute financial advice. All rates are sourced from Bloomberg and forecasts are taken from Forex Factory.