January 2026Monthly reportThe dollar weakened while the Fed held rates
An external retrospective on a weaker dollar, an unchanged Fed policy rate and the later reports describing January’s US economy.
Data window: 1 January 2026–31 January 2026
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The US dollar ended January weaker against a broad currency basket, the euro and the Japanese yen, even though the Federal Reserve left its policy rate unchanged. That combination is useful for understanding currency markets: an unchanged interest-rate decision does not require an unchanged exchange rate.
This external market retrospective focuses on the dollar, selected currency pairs and the US economy. It contains no analysis of PineConnector instructions for this period. January’s inflation and employment figures appear as retrospective economic context: they were released in February, after the currency window had ended.
The dollar’s decline appeared in the basket and the pairs
The Federal Reserve’s nominal broad dollar index fell 1.54% between the observations on 31 December 2025 and 30 January 2026. The index combines the dollar’s exchange rates against a weighted basket of currencies. A lower reading means the dollar weakened against that basket; it does not mean it fell by the same amount against every currency. These endpoints show where the selected measures finished relative to the preceding month-end observation. Federal Reserve, H.10 broad dollar index, December–January observations.
The selected pairs supported the broad direction. EUR/USD rose 1.27%, meaning the euro gained against the dollar. USD/JPY fell 1.57%, meaning the dollar lost value against the yen. The different signs reflect the way each pair is written, not conflicting evidence about the dollar. Federal Reserve, H.10 euro series; H.10 yen series.
reference-rate change (%)
Fed reference observations. Higher EUR/USD means a stronger euro; higher USD/JPY means a stronger dollar against the yen. Changes exclude costs and are not broker execution returns.
Source: Board of Governors of the Federal Reserve System: H.10 nominal broad dollar index, daily; Board of Governors of the Federal Reserve System: H.10 euro daily reference rate; Board of Governors of the Federal Reserve System: H.10 Japanese yen daily reference rate Download data (CSV): Figure 1
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| Measure | Period or release date | Value |
|---|---|---|
| Broad US dollar index | 2025-12-31 to 2026-01-30 | −1.54% |
| EUR/USD | 2025-12-31 to 2026-01-30 | +1.27% |
| USD/JPY | 2025-12-31 to 2026-01-30 | −1.57% |
Opposite signs can describe the same dollar move
An FX quote is a price with a direction. EUR/USD states how many US dollars buy a euro. When it rises, the euro costs more dollars. USD/JPY states how many yen buy a dollar. When it falls, a dollar buys fewer yen. January therefore offers a simple reading exercise: the euro quote rose and the yen quote fell, but both movements describe a weaker dollar.
For someone comparing headlines, identifying the currency being priced is more useful than reading a positive sign as strength in the abstract. A US-dollar payer buying euros faced a higher reference cost at the January endpoint. A yen holder buying dollars faced a lower reference cost. The relevant pair determines the meaning for the person making the conversion; the broad dollar index cannot replace that pair.
The percentage movement also belongs to the stated quote. Reversing a currency quote changes the calculation, so the percentage gain in the yen’s dollar value is not obtained simply by changing the sign of the USD/JPY percentage. The chart retains the source quote directions to keep that distinction visible.
These are Federal Reserve reference observations, based on New York noon buying rates. A bank or broker may quote a different rate at another time and may apply a spread or fee. The observations establish a comparable historical reference, rather than a conversion price available to every reader. Federal Reserve, About H.10.
A Fed hold left the exchange rate free to move
On 28 January, the Federal Reserve maintained its target range for the federal funds rate at 3.50% to 3.75%. This was an unchanged US monetary-policy setting, not a commitment to an exchange rate. The statement described the decision as part of the Fed’s assessment of economic conditions and risks. Federal Reserve, policy statement, 28 January 2026.
Interest rates matter to currencies because they influence the return available on interest-bearing assets. But the current policy rate is only part of the comparison. Expected future rates, conditions in the other currency’s economy and changing demand for assets can matter too. A decision can leave today’s rate unchanged while information about the future changes. This is a general explanation of why a hold and a currency move can coexist, not a finding about what drove January’s move.
The timing also limits the interpretation. The policy decision came near the end of the month, while the FX comparison spans the month-end endpoints. The full-period decline cannot be described as a reaction to that single announcement. Establishing a reaction would require observations around the announcement and evidence about what information was new.
January’s inflation report arrived after January ended
US consumer prices rose 0.2% in January on a seasonally adjusted basis. Excluding food and energy, the increase was 0.3%. These figures were published on 13 February, so they describe January’s economy with information released later. They cannot be treated as a January news release explaining January’s currency endpoints. Bureau of Labor Statistics, January CPI release, 13 February 2026.
monthly CPI-U price change, seasonally adjusted (%)
These prices describe January; the BLS release arrived the following month. They are not facts that were available throughout the month itself.
Source: US Bureau of Labor Statistics: CPI 2026-01 original news release Download data (CSV): Figure 2
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| Measure | Period or release date | Value |
|---|---|---|
| All items | Released 2026-02-13 | +0.2% |
| Excluding food and energy | Released 2026-02-13 | +0.3% |
The Consumer Price Index, or CPI, tracks the prices of a basket of consumer goods and services. “Headline” includes the full basket. “Core” excludes food and energy, allowing readers to examine price changes without those categories. Core does not describe every household’s bills: people still buy food and use energy.
The distinction mattered in January. Energy prices fell 1.50% over the month, while the all-items and core measures both rose. The lower headline increase therefore did not mean that prices outside food and energy were falling. It also did not mean every household experienced the same change in costs. BLS, January CPI release.
Annual inflation and monthly inflation answer different questions
Headline CPI was 2.4% above its year-earlier level, while core CPI was 2.5% higher. These annual comparisons are unadjusted. The monthly figures above are seasonally adjusted, meaning the calculation adjusts for recurring seasonal patterns to make adjacent months easier to compare. BLS, January CPI release and tables.
The annual figure describes how the measured price level compares with a year earlier. The monthly figure describes the latest step. Neither should be read as a promise about the next month. A slower rate of inflation would still mean prices were increasing if the rate remained positive; it would not mean the price level had returned to an earlier level.
Employment completed the retrospective picture in February
The initial January employment release reported an increase of 130,000 in nonfarm payroll employment and an unemployment rate of 4.3%. It was published on 11 February. Like January CPI, it belongs to the later description of January’s economy, not to the information released during January itself. BLS, January Employment Situation, 11 February 2026.
Payroll employment and unemployment describe different aspects of the labour market. Payrolls measure jobs in the establishment survey; the unemployment rate comes from the household survey and measures unemployed people as a share of the labour force. They are not interchangeable totals. The values here preserve the dated release, rather than silently replacing it with a later estimate.