January opened with markets focused less on conventional economic releases and more on the credibility of policy institutions. Political pressure on the US Federal Reserve became a defining feature of the month. Public criticism from the administration raised questions about central bank independence and the durability of the current monetary stance.
Despite the rhetoric, interest rate markets indicated limited expectation of immediate change. Softer inflation and labour market readings at the end of 2025 had not translated into a clear signal that rate cuts were imminent. Investors appeared to conclude that the Federal Reserve would prioritise institutional credibility over short term political pressure. This restrained reaction reduced the probability of abrupt moves in bond yields, although it did not remove uncertainty about the direction of policy later in the year.
Currency markets reflected this recalibration. The US dollar weakened as capital diversified into other developed market currencies. The euro and Swiss franc attracted inflows as investors sought alternatives perceived to be less exposed to domestic political tension. Sterling moved more modestly, reflecting its own macroeconomic considerations and policy outlook.
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