The Morning Update

The USD steadies, oil prices weaken, equity markets rally, and US yields rise as Greenland threats and tariffs are dropped. The US dollar held steady after President Trump walked back tariff and military threats tied to Greenland, easing fears of a renewed transatlantic trade clash and helping stabilize sentiment. With geopolitical risk temporarily receding, markets are refocusing on US inflation data — particularly the PCE release — as the next key guide for the Federal Reserve and near-term dollar direction. Global equities extended their relief rally as President Trump’s pivot on Greenland eased geopolitical tensions, lifting risk sentiment for a second straight session. US futures led gains, driven by strong performance in technology and AI-linked stocks, while European markets also benefited from reduced tariff fears, even as investors remained mindful that geopolitical risks and policy shifts could still trigger bouts of volatility. Elsewhere, oil prices weakened amid cautious demand expectations and easing geopolitical risk. Gold held steady near elevated levels, while Bitcoin continued to stall below the $90,000 mark amid subdued risk appetite in crypto markets. Today's focus will be on US GDP, Initial Jobless Claims, and the key Core Personal Consumption Expenditures - Price Index, which will drive intraday direction in currency markets.

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In the news. Trump drops tariff threat against Europe and touts 'future' Greenland deal. Poland upgrades its navy against Russia's Baltic threat. Lutnick heckled at Davos dinner as Lagarde walks out. NATO chief says allies must step up Arctic security in Greenland deal with Trump. Ukraine's Zelensky arrives for Davos talks with Trump. Putin to discuss Ukraine peace with US envoys after Trump says a deal is reasonably close. Ontario's Ford rallies the auto sector to reject Carney's China EV deal. TikTok Canada wins a reprieve and a new review, rather than a ban. Canada's pipeline problem returns as oil sands output surges.

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In currency markets. Against the US dollar, the Australian dollar extended its rally for a fourth straight session, reaching its strongest level since October 2024, as robust jobs data boosted expectations of a near-term RBA rate hike. In contrast, the Japanese yen remained weak versus the dollar, hovering near levels seen as intervention territory, even as investors look to a potentially hawkish stance from the Bank of Japan to help stabilize the currency. CNY slips 0.15%, while Asian currencies are flat on average against the USD. Trading currencies mostly rebound, with JPY, KWD down 0.1%, CZK, MXN & DKK up 0.15%, CHF firming 0.4%, ZAR gaining 0.5%, NZD & SEK strengthening 0.6%, and NOK & AUD rallying 0.7%.

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In commodity markets. Oil prices weakens 1%. Natural Gas prices rallies 10%. Gold prices are flat. Silver prices strengthens 1.2%. Copper prices are falling 0.8%. Coffee eased 0.5%. Soybean prices are up 0.25%, and Wheat prices gained 0.4%.

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CAD slipped off multi-week highs after briefly touching a two-week peak, as the loonie pared gains amid a modest recovery in the US dollar and ongoing focus on developments at the Davos forum. Oil prices weakened, limiting support for CAD, while markets also turned their attention to Thursday’s key US Core PCE inflation report, a crucial guide for the Federal Reserve’s policy outlook.

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EURCAD is trading flat as modest euro support from improved risk sentiment is offset by a resilient Canadian dollar following recent gains. With oil prices softer and both currencies lacking fresh domestic catalysts, the cross remains range-bound as investors look ahead to US inflation data and broader guidance from global central banks.

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EUR held steady near the 1.1700 mark as improved risk sentiment following easing EU–US trade tensions helped the pair stabilize after recent losses. The dollar remains resilient, however, limiting upside as investors turn their focus to a slate of US data releases, including jobless claims, GDP revisions and PCE inflation, which may shape expectations around the Federal Reserve’s policy outlook and drive near-term price action.

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GBPEUR edged lower toward three-week lows as sterling gave back gains after an initial boost from firmer UK inflation data faded. The euro remained supported by improved risk sentiment following the de-escalation of US–EU tensions over Greenland and steady guidance from ECB officials.

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GBP is broadly flat, holding above 1.3400 as initial support from stronger-than-expected UK inflation faded and the pair settled into a narrow range. Sterling’s gains have been capped by expectations that price pressures will ease later this year, while markets look ahead to key data releases including US PCE inflation and jobless claims, alongside upcoming UK retail sales and PMI figures for further direction.

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