The Morning Update

The USD is steady, oil prices ease, equity markets are down, and US yields ease as investors respond to tariff threats. The U.S. dollar steadied overall but slipped against safe havens as investors turned cautious after President Trump threatened new tariffs on Europe, boosting demand for the yen and Swiss franc. While policy uncertainty weighed on the greenback, analysts note the dollar’s safe-haven appeal could quickly return if trade tensions intensify. Global equity markets sold off as renewed geopolitical risk and US tariff threats triggered a broad risk-off move, pushing European stocks and US futures lower while safe havens rallied. Investors rotated out of cyclical sectors such as autos and luxury goods, while defence stocks outperformed amid escalating security rhetoric around Greenland. The reaction reflects markets repricing geopolitical uncertainty rather than region-specific fundamentals, with sentiment hinging on potential EU retaliation and further policy signals from Washington. Elsewhere, oil and Bitcoin prices fell as investors pared exposure to growth-sensitive and risk assets amid rising geopolitical and trade uncertainty. In contrast, gold and silver rallied sharply as safe-haven demand intensified, with investors seeking protection against volatility and policy risk. This week's economic calendar focuses on Monday, the CAD Inflation report. Tuesday, UK Jobs report, & US ADP Employment Change. Wednesday, UK CPI & PPI reports, President Trump Speech, ECB Lagarde's speech & US Pending Home Sales. Thursday, US GDP report, & US Core PCE - Price Index. Friday, UK Retail Sales, German PMI reports, EU PMI reports, & US S&P Global PMI reports will help drive currency markets this week.

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In the news. Stocks fall & gold hits record as Greenland crisis deepens. Trump links Greenland's pursuit of failure to win the Nobel Prize. The IMP warns that global economic resilience is at risk if AI falters. China registers lowest number of birth since records began. Carlsberg's 'core' beer brands drop to less than half of sales for the first time. UK Starmer calls for 'calm discussion' to avert trade war with the US over Greenland. Japan PM Takaichi to call Feb 8 snap election on spending, tax cuts and defence. Iran to consider lifting internet ban; state TV hacked. Chinese importers buy first Canadian canola cargo in months after Carney visit.

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In currency markets. Against the dollar, the Swiss franc and Japanese yen strengthened as investors sought traditional safe havens amid rising geopolitical and market uncertainty. The New Zealand dollar weakened amid risk-off sentiment and its sensitivity to global growth and commodity demand. CNY is up 0.1%, while Asian currencies slip 0.1% on average against the USD. Trading currencies are mixed, with NZD tumbling 0.55%, SEK, AUD & ZAR weakening 0.35%, MXN & CZK falling 0.15%, NOK down 0.1%, KWD & PLN are flat, JPY up 0.1%, NZD gaining 0.2%, and CHF rallied 0.5% against the USD.

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In commodity markets. Oil & Coffee prices weakened 0.85%. Natural Gas prices rallied 11.4%. Gold prices strengthened 1.75%. Silver prices rallied 5.2%, while Wheat & Soybean prices are flat.

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CAD firmed in early trading after hitting a six-week low on Friday, rebounding modestly as markets reacted to a Canada–China trade deal. Upside was capped by broader US dollar strength, heightened concern over US geopolitical tensions tied to Greenland, and caution ahead of today’s critical Canadian inflation report, which is expected to be closely watched by the Bank of Canada for signals on the timing and pace of future policy moves.

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EURCAD edges higher on modest euro strength, with markets positioning cautiously ahead of key Canadian inflation data. Attention is firmly on the CPI report and its implications for the Bank of Canada’s policy outlook, which is expected to play a decisive role in the near-term direction of the cross.

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EUR pushed above 1.1600 and climbed toward 1.1650 as escalating EU–US tensions over Greenland weighed on the US dollar, offsetting softer Eurozone inflation data. Trump’s threat of 10% tariffs on several European nations and the EU’s preparation of retaliatory measures have driven a risk-off tone, supporting the euro while US markets remain closed for the Martin Luther King Jr. Day holiday.

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GBPEUR trades flat as euro support from the ECB’s steady policy stance is offset by resilience in the pound following stronger UK economic data. Upbeat November GDP has reduced pressure on the Bank of England to accelerate rate cuts, keeping the cross range-bound ahead of key UK employment and inflation releases.

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GBP climbs above 1.3400 with the pound outperforming the US dollar as markets react to President Trump’s latest tariff threats against Europe over Greenland. Heightened geopolitical tensions and rising political risk premia are weighing on the greenback, allowing Sterling to hold gains ahead of key UK economic data.