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Investors returned from the Christmas holidays and favored defensive assets, causing the dollar to reverse sharply higher. European currencies have been adversely affected by this shift. December dollar selling and European FX buying trends were influenced by the dovish stance of the December Fed meeting. However, market enthusiasm for the Fed to cut interest rates is fading.
The current economic data in the United States does not have a major impact on the foreign exchange market. However, the real test is expected to be Friday’s non-farm payrolls, which could cause market turmoil regardless of the outcome.
