USD & Geopolitics: The ‘Trump Corollary’ is officially on
The US Dollar has remained firmly bid for much of the week, shrugging off macro data as geopolitics move front and center for the greenback. Has the dust settled yet with the latest geopolitical moves? We’ll see tomorrow once the NFP for December is released. For now, the Trump Corollary, dubbed by the latest National Security Strategy document from the Whitehouse as “Donroe Doctrine”, has emerged as the definitive driver of global markets to start the year, with geopolitical maneuvers now leading the narrative and overshadowing traditional macro indicators. However, we cannot necessarily read this week’s action as a direct celebration of American hemispheric dominance. While markets aren’t outright jittery, the greenback is benefiting from a persistent safe-haven bid as policy uncertainty keeps participants wondering: where will the Donroe Doctrine move next?
This atmospheric tension follows the recent U.S. operation in Caracas, which established a blueprint for “tactical decapitation” rather than total state collapse. By unseating Nicolás Maduro while maintaining the existing institutional framework under the compliant interim leadership of Delcy Rodríguez, the administration has engineered a “managed” government. This setup allows Washington to maintain a short leash to perform the surgical task of purging Chinese, Russian, and Iranian influence from South America, avoiding the logistical messiness of a full-scale occupation while prioritizing strategic denial over domestic legitimacy.
As investors digest this new “home region” security model, the focus is already shifting toward the Panama Canal and Greenland as the next logical focal points for the Trump administration. The current repricing suggests a move toward securing critical trade routes and infrastructure, signaling that the era of hands-off globalization is being replaced by a more localized, militaristic approach to economic security. Until the next move is telegraphed, the dollar is likely to remain supported not just by its traditional status, but as a barometer for the high-stakes campaign to ensure the Western Hemisphere remains an uncontested American stronghold.
USD & Global Markets: What’s the outlook for global markets in Q1?
Different angles of the same story. On one hand, after closing the books on 2025, the S&P 500’s 18% return looks respectable in a vacuum, but it actually masks a historic shift in global capital. For the first time since the 2009 financial crisis, US equities were significantly outpaced by the rest of the world, with the MSCI World ex-US index surging 31%.
On the other hand, despite the constant chatter about “de-dollarization” and a mass exodus from US markets, foreign demand for American assets actually proved more robust in 2025 than the year prior.
Speaking of U.S. stock market performance alone, the broader participation we saw from the “S&P 493” wasn’t just a fluke. For the first time in three years, the average stock in the index (the 493) actually contributed more to the annual gain (10.4%) than the “Magnificent 7” (7.5%). This shift toward market breadth is evidenced by the 493 posting consistent returns of 10.0%, 11.7%, and 10.4% over the last three years. It’s a healthy signal that the rally isn’t just a top-heavy tech story anymore, but rather a diversified move across the broader economy.
Now, the outlook for 2026 is clouded by what many see as a towering AI and tech bubble risk. While that remains the primary concern, a potential loss of Federal Reserve independence and a simmering crisis in the private credit markets are the “gray swans” keeping institutional investors awake at night.
We are also witnessing what some call the “revenge of the physical world.” Whether it’s a hedge against the stealth debasement of fiat currencies or a pure supply-demand crunch, 2025 was a “banger” year for metals. Copper is currently poised for a 40% gain, its most explosive annual rise since 2009, fueled by the massive infrastructure needs of the energy transition. Meanwhile, gold and silver are finishing their best year since 1979. This synchronized rally across precious and industrial metals suggests that investors are pivoting back toward tangible assets as a primary store of value.
Looking ahead, the shadow of fiscal dominance continues to loom over the macro landscape. As the debt burden mounts, we expect the term premium to climb, potentially forcing a fragmented Federal Reserve into a corner.
The math is becoming unforgiving: unless U.S. national growth consistently outpaces the interest paid on U.S. debt, the current trajectory remains fundamentally unsustainable. Yet, for now, a precarious balance holds. Markets are betting that a combination of aggressive fiscal stimulus, healthy liquidity, and continued Fed easing will ignite enough growth in 2026 to effectively outrun the debt clock. Whether this becomes a self-fulfilling prophecy of expansion or a final bridge toward a fiscal crisis remains the defining question for the year ahead.
CAD: Loonie tanks on geopolitics fears
The USD/CAD pair has retreated to start the year, hitting 1.3860 and effectively reclaiming its 200-day Simple Moving Average (SMA) at 1.3849. This move has fundamentally shifted the chart’s vibe, as markets scramble to price in the geopolitical earthquake in Venezuela. With the U.S. military capture of Nicolás Maduro and Washington’s plan to market Venezuelan crude “indefinitely,” the “Venezuela discount” is hitting the Canadian Dollar hard. Traders are quickly realizing that the U.S. control of these proceeds creates a massive narrative shift that favors the Greenback over the Loonie.
This geopolitical noise has wreaked havoc on the TSX Energy index, which is struggling to find its footing. While WTI is oscillating in the $56–58 range, Canadian energy equities have taken the brunt of the selling. Heavyweights like Canadian Natural Resources (CNQ) and Cenovus Energy (CVE) saw intraday plunges of 6% to 8% earlier this week, and while they’ve clawed back some ground, they remain under pressure as the market weighs the long-term threat of Venezuelan heavy crude competing for U.S. refinery space. Even though the WCS–WTI differential widened to nearly -$14.00/bbl, analysts are calling this a classic “knee-jerk overreaction,” noting that it will take years and billions in capital to actually fix Venezuela’s crumbling infrastructure.
Technically, the pair is now trading above both its 50-day and 200-day SMAs, and with the RSI pushing slowly into overbought territory, the momentum is clearly with the bulls. If we see any pullbacks toward the 1.3780–1.3800 zone, expect dip-buyers to step in aggressively. On the topside, the 1.3860 level is the immediate pivot, with the big psychological target at 1.3900 looming large. While intraday models show some minor friction around 1.3790, the broader trend is looking much more constructive for the USD.
Looking ahead, all eyes are on this Friday’s double-dose of jobs data from both the U.S. and Canada. Given the current Fed easing dynamics and the persistent geopolitical headlines, this report is going to be the next major catalyst to determine if USD/CAD can clear 1.3900 or if it needs to catch its breath. For now, the “Venezuela factor” is the dominant driver, keeping the CAD on the defensive as the energy sector tries to filter through the noise.
Market snapshot
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: January 5 – 10
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
