The U.S. dollar started the first full trading week of 2026 on a strong footing, rallying to multi-week highs against major currencies. The greenback climbed to a 3½-week peak versus the euro and reached two-week highs against the yen, Swiss franc, and Canadian dollar, reflecting renewed investor focus on U.S. economic indicators and Federal Reserve policy expectations.

Despite weekend geopolitical developments—including a U.S. raid in Venezuela and the capture of President Nicolás Maduro—currency markets appeared largely unfazed, with traders concentrating on domestic macroeconomic data likely to influence the Fed’s monetary stance.

At the European trading open, the dollar strengthened 0.3% to $1.1682 per euro, having earlier touched its strongest level since December 10 at $1.1672. Against the Japanese yen, the greenback climbed to 157.295, while it reached 0.7951 Swiss franc and C$1.37771 Canadian dollar, marking highs not seen since December 22.

“I dare say the FX complex is not much of a reflection of risks stemming from Venezuela, but more about what the U.S. data is going to tell us about the Fed's policy path,” said Kyle Rodda, senior financial markets analyst at Capital.com. He noted that a string of resilient U.S. economic figures has led markets to consider a potentially slower pace of interest rate cuts this year.

Traders are closely watching a series of key U.S. data releases, starting with ISM manufacturing figures on Monday and culminating in Friday’s non-farm payroll report. According to LSEG calculations, markets currently expect two interest rate cuts in 2026, depending on economic developments.

Investors are also awaiting U.S. President Donald Trump’s choice for the next Federal Reserve chair, as Jerome Powell’s term concludes in May. Trump has indicated he will announce his pick this month, describing the successor as “someone who believes in lower interest rates, by a lot,” heightening market anticipation over potential shifts in monetary policy.

Meanwhile, in Japan, Bank of Japan Governor Kazuo Ueda reiterated that the central bank will continue to raise rates if economic and price developments align with forecasts. This stance follows the BOJ’s December decision to lift rates to a three-decade high, reflecting its ongoing commitment to controlling inflation while supporting growth.

Elsewhere in currency markets, the dollar gained 0.1% to $1.3425 per British pound and added 0.3% versus the Australian dollar, trading at $0.6670, underscoring the broad-based strength of the greenback at the start of the year.