US Dollar Forecast & FX Outlook - January 2026
Written by Ash AbbasiStay ahead of currency markets with MTFX’s US Dollar latest Monthly Forecast for 2025. This page delivers expert analysis on USD performance, including exchange rate trends, economic drivers, and directional outlooks for major currency pairs like USD/CAD, EUR/USD, and GBP/USD. Access dynamic tables, FX projections, and economic event calendars to guide your international transfers and global payment planning. Whether you're a business or individual, use MTFX tools to make smarter foreign exchange decisions.
January 2026 US Dollar Performance & Market Context
The US dollar enters January 2026 in a more balanced position than it held through much of 2024 and early 2025. Markets are increasingly focused on how quickly US monetary policy transitions from restrictive to neutral as inflation cools and economic momentum moderates. While the Federal Reserve has not yet pivoted decisively, forward-looking rate expectations continue to narrow the yield advantage that supported USD strength over the past two years.
Seasonal liquidity conditions at the start of the year can amplify moves, particularly around key US inflation and employment data releases. With markets recalibrating long-term growth and rate assumptions, the USD is expected to trade with greater two-way volatility, rather than displaying a clear directional trend. Risk sentiment, global equity performance, and interest rate differentials remain the dominant drivers across G10 and EM currencies.
Commodity-linked currencies begin the year with relative support, while defensive currencies are likely to respond quickly to any deterioration in risk appetite. Overall, January sets the tone for a year where USD performance is likely to be driven less by outright strength and more by relative value across currency pairs..
January 2026 Global FX Performance
| Currency Pair | Jan 11, 2026 | Weekly Change | Monthly Change | Yearly Change |
|---|---|---|---|---|
| USD / CAD | 1.39 | 0.76% | 0.76% | -3.48% |
| EUR / USD | 1.16 | -0.36% | -0.52% | 14.01% |
| GBP / USD | 1.34 | -0.72% | 0.53% | 10.19% |
| USD / JPY | 158.09 | 0.91% | 1.28% | 0.22% |
| USD / CHF | 0.80 | 0.64% | 0.09% | -13.07% |
| USD / CNY | 6.98 | -0.20% | -1.14% | -4.87% |
| USD / INR | 90.24 | -0.07% | -0.46% | 4.07% |
| AUD / USD | 0.67 | -0.10% | 0.83% | 8.60% |
| NZD / USD | 0.57 | -0.62% | -0.91% | 3.04% |
| USD / MXN | 17.97 | 0.07% | -0.46% | -13.16% |
January 2026 FX Forecasts
At the same time, the forecast highlights steady USD underperformance against growth- and risk-sensitive currencies, underscoring a slow rotation away from dollar-centric positioning. The euro and sterling are both projected to extend gains through 2026, supported by improving domestic momentum and more balanced rate expectations, while the Australian and New Zealand dollars show a clear upward path as global risk appetite improves. In emerging markets, the USD’s outlook is more mixed, with modest near-term firmness against the Indian rupee giving way to renewed pressure elsewhere, particularly against the Mexican peso and Chinese yuan. Overall, the projections reinforce a scenario in which the US dollar remains functional and liquid, but increasingly gives ground as markets shift focus toward relative growth resilience and longer-term policy convergence.
US Dollar Quarterly Forecasts - January 2026
| Currency Pair | Jan 2026 | Mar 2026 | Jun 2026 | Sep 2026 |
|---|---|---|---|---|
| USD / CAD | 1.3692 | 1.3800 | 1.3700 | 1.3500 |
| EUR / USD | 1.1756 | 1.1800 | 1.2000 | 1.2200 |
| GBP / USD | 1.3468 | 1.3490 | 1.3480 | 1.3630 |
| USD / JPY | 156.59 | 152.00 | 150.00 | 148.00 |
| USD / CHF | 0.7936 | 0.7970 | 0.7880 | 0.7790 |
| USD / CNY | 6.9876 | 6.9500 | 6.9000 | 6.8500 |
| USD / INR | 89.99 | 90.500 | 91.500 | 92.000 |
| AUD / USD | 0.6687 | 0.6800 | 0.6900 | 0.7000 |
| NZD / USD | 0.5770 | 0.5900 | 0.5950 | 0.6000 |
| USD / MXN | 18.02 | 18.200 | 18.000 | 17.900 |
January 2026 FX Highlights & Monthly Ranges
Emerging-market signals broadly align with this narrative, though with greater dispersion. The US dollar shows a mild bearish bias against currencies supported by policy stability and carry dynamics, such as the Mexican peso and Chinese yuan, while remaining relatively firm against the Indian rupee due to persistent structural USD demand and managed volatility. Risk-sensitive currencies continue to benefit when global sentiment holds steady, but remain vulnerable to abrupt shifts in rates or macro surprises. Taken together, the January FX landscape suggests the USD is entering the new year in a more reactive role, responding to global growth sentiment and yield movements rather than driving them. The overarching theme remains one of gradual, controlled USD depreciation, tempered by episodic resilience rather than a sharp or disorderly decline.
| Currency | Market News | |
|---|---|---|
CAD | Canadian Dollar (USD/CAD) The Canadian dollar starts January supported by stabilizing energy prices and a reduced policy divergence between the Bank of Canada and the Federal Reserve. As US rate expectations soften, USD/CAD loses part of its upside momentum, allowing CAD to perform well on relative valuation grounds. However, CAD remains sensitive to oil price swings, global risk sentiment, and US data surprises. Short-term volatility is likely around US inflation and employment releases, but the broader trend suggests USD/CAD rallies may be shallow unless risk sentiment deteriorates materially. Canadian economic data will matter less than external factors in early January. Bias:↑ CAD mildly bullish Jan 2026 USD/CAD Monthly Range: 1.36-1.40 | |
EUR | Euro (EUR/USD) EUR continues to benefit from the theme of a gradually softening US dollar rather than strong domestic eurozone momentum. As US rate premiums narrow, EUR/USD remains biased higher, although gains are unlikely to be linear. January price action may be choppy as markets reassess inflation progress on both sides of the Atlantic. The euro tends to outperform when volatility remains contained and global growth expectations are stable. Any risk-off episode could temporarily cap EUR upside, but the broader valuation and rate dynamics remain supportive. Bias:↑ EUR Bullish Jan 2026 EUR/USD Monthly Range: 1.16 – 1.20 | |
GBP | British Pound (GBP/USD) Sterling enters the year trading largely as a USD-driven currency rather than on UK-specific fundamentals. While domestic growth remains subdued, GBP benefits from its relatively attractive yield profile and improving external balances. January movements are expected to track broader USD direction and global risk appetite, with GBP outperforming in calmer markets and lagging during risk-off episodes. Upside may be slower than EUR, but downside should remain contained unless global conditions worsen. Bias:↑ GBP Mildly Bullish Jan 2026 GBP/USD Monthly Range: 1.33 – 1.37 | |
JPY | Japanese Yen (USD/JPY) JPY remains highly sensitive to US yield movements and rate-spread dynamics. As expectations shift toward lower US yields later in 2026, USD/JPY retains downside risk, particularly during periods of market stress or falling global yields. However, January could still see elevated USD/JPY levels if US data surprises to the upside or if risk sentiment remains strong. Directional conviction is likely to build later in the quarter rather than early January. Bias:↓ USD Mildly Bearish Jan 2026 USD/JPY Monthly Range: 150.00 – 156.00 | |
CHF | Swiss Franc (USD/CHF) The Swiss franc continues to act as a defensive anchor in periods of uncertainty. With global rates expected to trend lower, CHF stands to benefit from reduced carry disadvantages versus the USD. In January, USD/CHF is expected to trade with a mild downward bias, though strong risk-on conditions could briefly support USD rebounds. CHF strength is more likely to emerge during volatility spikes rather than steady market conditions. Bias:↓ USD Mildly Bearish Jan 2026 USD/CHF Monthly Range: 0.78 – 0.81 | |
CNY | Chinese Yuan (USD/CNY) CNY is expected to remain tightly managed, with authorities prioritizing stability over large directional moves. As the USD softens marginally, USD/CNY may drift lower, though any appreciation is likely to be gradual and controlled. January flows, export trends, and risk sentiment will influence short-term direction, but large dislocations remain unlikely under current policy settings. Bias:↓ USD Mildly Bearish Jan 2026 USD/CNY Monthly Range: 6.95 – 7.05 | |
INR | Indian Rupee (USD/INR) INR remains structurally supported by strong growth fundamentals but constrained by managed volatility and persistent USD demand. In January, portfolio flows and global risk conditions are likely to dominate price action. The broader trend suggests USD/INR remains elevated, with gradual upward pressure persisting even as the USD weakens elsewhere. Bias:↑ USD Mildly Bullish Jan 2026 USD/INR Monthly Range: 89.80 – 91.50 | |
AUD | Australian Dollar (AUD/USD) AUD is positioned as a leveraged play on global growth sentiment and commodity demand. As markets anticipate easing financial conditions later in 2026, AUD retains upside potential, though January may begin cautiously. Any pullback in risk appetite or commodity prices could cap gains temporarily, but the broader outlook remains constructive. Bias:↑ AUD Mildly Bullish Jan 2026 AUD/USD Monthly Range: 0.66 – 0.69 | |
NZD | New Zealand Dollar (NZD/USD) NZD shares similar dynamics with AUD but tends to display higher volatility. January trading is expected to be range-bound, with upside emerging gradually as risk conditions improve. Short-term moves will likely reflect global sentiment rather than domestic data. Bias:↑ NZD Mildly Bullish Jan 2026 NZD/USD Monthly Range: 0.57 – 0.60 | |
MXN | Mexican Peso (USD/MXN) MXN remains one of the most sensitive currencies to shifts in risk appetite. Strong carry dynamics support the peso during calm market conditions, but volatility can trigger sharp reversals. January trading is likely to be active, with USD/MXN responding quickly to US rate moves and global risk sentiment. The broader trend points to gradual peso strength through 2026, though drawdowns remain a risk. Bias:↓ USD Mildly Bearish Jan 2026 USD/MXN Monthly Range: 17.80 – 18.60 | |
What Economic Data to Watch This Month
The focal point of the month is the Federal Reserve’s interest-rate decision toward the end of January. While no immediate policy change is expected, forward guidance and tone will be closely examined for confirmation of a softer policy trajectory. Additional data points, including core PCE inflation, durable goods orders, and trade balance figures, will help refine the broader macro picture. Overall, January’s calendar suggests measured but persistent sensitivity for the US dollar, with volatility likely to cluster around inflation data and central bank communication rather than broad economic surprises.
| Currency | Date | Event |
|---|---|---|
| USD | Jan 12, 2026 | Inflation Rate |
| USD | Jan 12, 2026 | New Home Sales |
| USD | Jan 13, 2026 | Retail Sales |
| USD | Jan 13, 2026 | Existing Home Sales |
| USD | Jan 14, 2026 | NY Empire State Manufacturing Index |
| USD | Jan 14, 2026 | Philadelphia Fed Manufacturing Index |
| USD | Jan 18, 2026 | Martin Luther King, Jr. Day |
| USD | Jan 21, 2026 | Core PCE Price Index |
| USD | Jan 22, 2026 | Michigan Consumer Sentiment |
| USD | Jan 25, 2026 | Durable Goods Orders |
| USD | Jan 27, 2026 | Fed Interest Rate Decision |
| USD | Jan 28, 2026 | Trade Balance |
Written by
Ash Abbasi
Director of SalesAsh Abbasi is the Director of Sales at MTFX, specializing in corporate FX and cross-border payment solutions for Canadian businesses. With a background in sales leadership and account management across global markets, he helps clients optimize international transactions and manage currency risk. Ash holds a degree from Aston Business School and a postgraduate diploma from Humber College.
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What drives monthly changes in the US dollar exchange rate?
The USD dollar exchange rates shift monthly based on economic data, monetary policy, and global events. While some changes are minor, others can significantly impact international payments and investments.
Key factors behind monthly USD moves:
What drives monthly changes in the US dollar exchange rate?
The USD dollar exchange rates shift monthly based on economic data, monetary policy, and global events. While some changes are minor, others can significantly impact international payments and investments.
Key factors behind monthly USD moves:
Federal Reserve policy
Rate hikes or dovish signals can strengthen or weaken the dollar.
Inflation reports
Data like CPI and PPI shape expectations for interest rate changes.
Employment figures
Nonfarm payrolls and jobless rates reflect overall economic health.
GDP growth
Strong or weak economic performance affects USD sentiment.
How much can the US dollar move in a month?
The US foreign exchange rates can fluctuate by 1% to 3% against major currencies in a typical month. However, during periods of high volatility—such as interest rate hikes or geopolitical shocks—monthly movements may exceed 5%, especially against currencies like the Japanese yen or emerging market pairs.
These shifts directly impact the cost of international transactions, from sending money abroad to paying overseas suppliers. Staying informed on the USD forecast and understanding what drives these changes helps individuals and businesses make smarter financial decisions and manage currency risk more effectively.
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