FX Markets Open 2026 Quietly as Dollar Softens and European Currencies Hold Firm.

  • USD – The US dollar has started 2026 on the back foot after a steep 2025 decline, with thin holiday liquidity amplifying a broad pullback

  • EUR –  The euro is trading in a tight range but remains modestly supported by expectations the ECB will keep policy steady

  • GBP – Sterling is steady and range-bound in quiet early-year trading, underpinned by recent gains against the dollar

USD:

The US dollar opened the year weaker, continuing a trend from 2025 where it suffered its steepest annual drop in nearly a decade, down about 9% against a basket of major currencies. Markets have attributed this to a narrowing interest rate gap with other economies, fiscal uncertainties, and shifting Fed policy expectations. Early trading on 2 Jan has seen a broad dollar pullback, with other majors like EUR, GBP and AUD gaining ground as market liquidity remains thin around holiday-thin trading. With no major U.S. data on the calendar today, the dollar’s direction is being shaped largely by broader sentiment and expectations for future Federal Reserve policy, markets are pricing in potential additional Fed rate cuts later in 2026 which further weigh on USD support.

EUR: 

EUR/USD continues to trade in a narrow range during early January holiday conditions as geopolitical drivers and monetary policy expectations hold sway. The euro has found modest support on expectations that the European Central Bank will keep interest rates unchanged for some time, contrasting with anticipated Fed easing which narrows the policy differential and bolsters EUR/USD. Improved Eurozone macro data and positive sentiment toward the single currency has helped lift the euro’s performance against the dollar so far this week. With ECB policy expected to remain on hold, the euro may continue to outperform the dollar in the near term, but significant moves might wait until official eurozone data returns to focus next week.

GBP: 

GBP/USD is trading relatively calm above, reflecting a subdued start to 2026 on thin holiday liquidity. Sterling enters the New Year on a stronger footing after a sizeable 2025 rally against the dollar, though gains versus the euro were limited. GBP movements remain range-bound today, with markets waiting for fresh UK economic releases rather than any immediate Bank of England headlines. Pound volatility is expected to pick up next week when economic data returns to market focus; for now, GBP remains supported by broader dollar softness.

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.