The Morning Update

The USD weakens, oil prices firm, equity markets are down, and US yields rise as risk sentiment fades due to US tariff concerns. The US dollar struggled for a second straight day as President Trump’s renewed push to take control of Greenland and threats of additional tariffs on Europe revived the “Sell America” trade. Rising geopolitical risk has weighed on US assets, boosting safe havens such as the Swiss franc and gold, while investors grow more cautious about the credibility of US trade relationships. Global equities extended their selloff as escalating tensions between the US and Europe over Greenland reignited trade-war fears, pushing US futures and European stocks sharply lower and erasing year-to-date gains for key benchmarks. The risk-off mood was amplified by turmoil in global bond markets after a selloff in Japanese debt drove yields higher worldwide, while investors sought safety in gold and other havens amid rising geopolitical uncertainty, stretched equity valuations, and a busy week of potential policy catalysts, including a US Supreme Court ruling and President Trump’s Davos speech. Elsewhere, oil prices firmed amid ongoing supply and geopolitical concerns, while gold and silver extended their rally as investors sought traditional safe havens. Bitcoin weakened alongside broader risk assets but remained resilient above $90,000, suggesting underlying support amid the risk-off tone. Today's economic calendar is light, so focus will remain on Greenland and the proposed US tariffs.

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In the news. DOW set to fall more than 600 points on Trump's new tariff threat over Greenland. Trump threatens 200% tariff on French wines as Macron reportedly snubs 'Board of Peace" seat. Carney aims to lead a new global trading order less reliant on the US. Renault 2025 volumes up 3% as Clio & Sandero boost sales. Stocks fall, dollar struggles as Trump's Greenland gambit rattles markets. BoE's Bailey says geopolitics and trade tensions pose financial risks. EU nears historic trade deal with India, Von der Leyen says. Gold extends rally, notches new record high above $4,700.

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In currency markets. Against the US dollar, the Swiss franc rallied on strong safe-haven demand amid intensified geopolitical tensions and market volatility. The Danish krone also strengthened, supported by Denmark’s central role in the Greenland dispute, expectations of capital repatriation and policy backing, and broader European inflows as confidence in the dollar softened.CNY is up 0.1%, while Asian currencies firmed 0.2% against the USD. Trading currencies are mixed, with NZD tumbling 0.8%, ZAR weakening 0.4%, MXN & AUD falling 0.3%, KWD up 0.1%, JPY up 0.2%, NOK gaining 0.5%, CZK & PLN firming 0.6%, DKK strengthening 0.8%, and CHF rallying 1.1% against the USD.

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CAD extended gains to fresh 10-day highs against the US dollar as broad greenback weakness and firmer domestic inflation data supported the loonie. Headline inflation accelerated to 2.4% in December, keeping the Bank of Canada cautious but reinforcing expectations that rates will remain on hold in the near term, while commodity prices and mixed bond yields provided additional support.

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EURCAD strengthened through the 1.62 level as euro demand was supported by heightened EU–US tensions over Greenland, which have weighed on North American currencies. The move also reflects cautious positioning ahead of the Bank of Canada's outlook, with investors weighing mixed inflation signals and the likelihood that the BoC will remain on hold in the near term.

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EUR climbed to a two-week high above 1.1700 as investors continued to react to headlines surrounding the escalating EU–US dispute over Greenland, which has weighed on the US dollar. In the absence of major data releases, political developments and broader USD sentiment remain the primary drivers of the pair’s near-term direction.

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GBPEUR eased as the pound softened following mixed UK labour market data, with unemployment holding at 5.1% and the claimant count rising in December. The euro remains supported by expectations that the ECB is near the end of its rate-cutting cycle and comfortable maintaining a steady policy stance, keeping pressure on the cross.

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GBP edged higher against the US dollar despite weak UK labour market data showing accelerating job losses and easing wage growth. BBH warns that softer employment conditions leave the Bank of England scope to cut rates further, while Governor Andrew Bailey highlighted rising geopolitical and trade tensions as a key risk to financial stability, potentially limiting upside in GBP/USD.

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