FX Daily: Warsh is the dollar lifeline, for now in Daily Currencies Ratings 30/01/2026 USD: More may be needed to fuel USD recovery The dollar has been waiting for a catalyst for a recovery, and the news that Kevin Warsh is likely to be announced as the new Federal Reserve Chair nominee today offers exactly that. Warsh has been amongst the most market-friendly candidates, as he is a former Fed governor with a history of hawkish views, especially on balance sheet reduction. Given how adamant Trump has been on reducing rates, it’s safe to assume Warsh has taken a more dovish stance during the interview process – but this pick may suggest a desire to calm speculation on Fed independence loss. Warsh was tied as front-runner with Rick Reider – another market-friendly option – so the Fed-independence-concerns contribution to the latest dollar selloff was probably somewhat limited. Nevertheless, we have seen a decent recovery in USD in the range of 0.2-0.8% against G10 currencies. It appears this could at least lower the risks of another major leg lower in the dollar for now. That said, there is a clear interest in buying the EUR/USD dip around 1.190 despite plenty of signals that the USD drop is too stretched relative to rates and the macro story. Another positive catalyst for the USD may well be needed to break the bearish tendency and take it on a steadier recovery. This could come from some comments by US officials about not being that comfortable with a rapid USD selloff after all, or strong data. Today’s PPI may not have much impact; ISM surveys next week, ahead of jobs data (ADP and official payrolls), offer the next best opportunity in that sense. Data was not particularly supportive for USD yesterday either. Jobless claims were encouragingly low, but that’s no news; the issue with the jobs market is low hiring, not high firing. What was surely surprising was the widening in the US trade deficit from $29.2bn to $56.8bn between October and November. This likely reflects how the previous tightening in the trade deficit was driven by ships being held in port due to uncertainty about whether Liberation Day tariffs would stick. But it appears those ships were then released in November as imports jumped 5%. The impact of all this can be seen in the popular Atlanta Fed GDPNow 4Q estimate, which has dropped from 5.4% to 4.2% after this week’s data. Francesco Pesole EUR: Lots of data, limited impact potential As discussed above, EUR/USD continues to attract buyers around the 1.188-1.1900 area, despite the more positive mood on USD. A break lower appears entirely USD-dependent anyway, and some eurozone data activity today should be secondary. That includes German and Spanish CPI figures for January, as well as advanced GDP figures for the fourth quarter. Expectations for the latter are a modest slowdown from 0.3% to 0.2% quarter-on-quarter growth (also ING’s call), translating into 1.3% year-on-year – a figure markets are likely fully pricing in at this stage. We see German growth at a consensus 0.2% QoQ, while inflation may accelerate slightly from 1.8% to 1.9%. Our macro team has published their ECB preview for next week. The euro will be a prominent theme, but previous reluctance by President Christine Lagarde to discuss FX suggests expectations for strong views on the currency should be kept in check. This may be more of a longer-term issue, with sustained EUR strength leading to potential downward revisions in inflation. Francesco Pesole CA