If you thought 2026 was going to be any less full of risk for currency markets, geopolitics and the global economy you’ll already have had a rude awakening, although not as rude as that of Nicolas Maduro early on Saturday morning.
The fact that America’s apparent takeover of Venezuela’s government happened when the markets were closed for two days has given the currency markets a chance to work out the implications.
So far, in early trading the US dollar has strengthened almost across the board, but not to any great degree – barely a third of a cent against any pairing. The Chinese yuan has fared better. Sterling remains close to a four-month high against USD and has strengthened to a new multi-month high against a euro generally in retreat.
However, this may not be the end of the story and the ramifications of the Venezuelan action could be ongoing. Even if a safe and orderly regime change in Caracas can be organised from Washington, the potential division of the world into strongman spheres of influence has implications for Taiwan, Ukraine, eastern Europe and even Greenland, part of Denmark. Moreover, Venezuela is not the only huge oil producer in play, with ongoing protests in Iran.
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Back to more mundane economic events, and Friday’s final results for the Purchasing Managers Index (PMI) were an early disappointment for the New Year, almost all being downgraded from their earlier estimates. The USA, UK, Spain, Italy and Germany all saw fading optimism among manufacturing business leaders in December. We’ve got more PMI data out tomorrow in different industrial sectors, but will it be as negative?
Another risk highlighted for sterling in 2026 is the fate of the prime minister. Whether a 45-minute “re-set” interview with the PM on the BBC will have done anything to shore up his position remains to be seen. Sir Keir Starmer warned against leadership challenges, saying they would simply gift the next election to Nigel Farage’s Reform Party. One thing he was clear in was aligning Britain closer to Europe’s single market, and this could support sterling.
