Once Upon a Time in Venezuela

January 05, 2026

Elias Haddad

Financial market response to the Venezuela development has been orderly and restrained.

US December ISM manufacturing is today’s data highlight.

Check-out our Drivers for the Week Ahead for insights on what will move markets.

USD kicked off the week firmer against all major currencies, with the dollar index (DXY) facing next resistance at its 200-day moving average. Brent crude oil prices dropped as much as 2.4% to $59.80 a barrel, closing in on its multi-year low of $58.40 recorded on April 9, 2025. Gold is up, eyeing its record high of nearly $4550 an ounce set on December 26, 2025. Stock markets are gaining ground while bond markets are steady.

The Trump administration action in Venezuela is entirely consistent with the updated US National Security Strategy report published in November last year. As such, the implications for USD should be limited.

Instead, relative monetary policy remains a drag for USD. Most other major central banks are done easing, while the Fed has room to deliver the 50bps of cuts priced-in by Fed funds futures in 2026. US labor demand is weak and upside risks to inflation are fading.

The December ISM manufacturing index is expected to show a slower contraction in manufacturing sector activity (3:00pm London, 10:00am New York). The headline index is projected at 48.4 vs. 48.2 in November. Watch the prices paid and employment sub-indexes to see if inflation risks continue to recede and/or job losses deepen.

JAPAN

USD/JPY is holding under its recent double-top around 158.90. Bank of Japan (BOJ) Governor Kazuo Ueda reiterates the bank’s hawkish bias. Ueda said “We will keep raising rates in line with improvement in the economy and inflation.” The BOJ has room to increase rates as the policy rate (0.75%) is still below the bank’s estimate of the neutral range between 1% and 2.5%.

The swaps curve is betting on nearly 50bps of BOJ rate hikes in the next twelve months, in sharp contrast to the 75bps of easing priced for the Fed. Bottom line: USD/JPY has scope to converge with one-year implied policy rate differentials and trade closer to 140.00.

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