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The US dollar confirmed last week that it remains a safe-haven currency of choice for investors during times of global conflict.

The New Year has begun with a bang following the shock ousting and capture of Venezuela President Nicolás Maduro by US forces over the weekend, but the early reaction in currency and futures markets has been calm.

The dollar sold off against most of its peers after the Federal Reserve fell short of delivering on market expectations for a "hawkish cut" last week.

what can we expect in markets during the remainder of the year? And what are the main factors to look out for in FX in the coming months?

As the results of the UK general election filtered through during the early hours, markets responded with a shrug to the anticipated Labour majority victory under newly-appointed Prime Minister Keir Starmer. Despite a narrower victory margin than both the polls and models had predicted, the impact on sterling has thus far been muted, reflecting investor preparedness for the political landscape that lies ahead.

Investors have no time to rest on their laurels as we approach the Christmas break and year-end, with all of the world’s ‘Big Three’ central banks to unveil their final policy decisions of 2023 this week.

Currencies were thrust out of their recent slumber on Tuesday, as a softer-than-expected US inflation report sent the dollar sharply lower and raised the possibility of a long-awaited dovish pivot from the Federal Reserve at its meeting this evening.

Focus in financial markets continues to remain on the UK after an extraordinary few days that have culminated in the reversal of almost all of the controversial tax cuts announced during last month’s mini-budget.

The euro seemed to be about to lock in a decent performance last week, buoyed by expectations of a hawkish ECB and a labour market report in the US that signalled to the Fed that pressures there may be easing.

The Chinese yuan was one of the best performing currencies worldwide up until very recently.

Another week of risk asset sell offs had a predictable effect on currency markets.

Risk sentiment was buffeted in both directions on Tuesday, leading to a relatively volatile trading day for most currencies.