In particular, European Central Bank (ECB) President Christine Lagarde addressed this issue during her speech at the World Economic Forum in Davos, noting that the EU economy currently requires a profound structural reassessment. Lagarde also touched on the sensitive issue of import tariffs, which have effectively become an “economic weapon,” enabling countries such as the United States to exert pressure on competitors. It is worth recalling that last Saturday, the White House administration announced new 10.0% import tariffs on goods from Denmark, Norway, Sweden, Germany, France, the United Kingdom, the Netherlands, and Finland, effective February 1, with the rate potentially rising to 25.0% from June 1.
These tariffs are expected to be added to the existing 15.0% duties agreed last year following negotiations between the US and the EU. The trigger for the new trade restrictions was Washington’s territorial claims over Greenland: the US president is insisting on full control over the island, citing national and NATO security concerns, while European nations reject any infringement on the sovereignty and territorial integrity of EU members. Commenting on the escalation of trade tensions, Lagarde noted that the new tariffs would have limited impact on France’s economy but could significantly pressure Germany. French President Emmanuel Macron stated on Tuesday that the EU possesses sufficiently “powerful tools” to counter external pressure. Nevertheless, it emerged yesterday that Donald Trump decided to soften his rhetoric and abandoned plans to introduce additional tariffs from February 1 after reaching a “framework agreement” on Greenland within NATO.
Against this backdrop, the euro lost its upward momentum and closed Wednesday’s session in negative territory. Meanwhile, the US dollar faced moderate pressure due to weak data on pending home sales, which strengthened expectations of further interest rate cuts by the Federal Reserve. On an annual basis, the indicator fell by 3.0% after rising 2.6% in November, while the monthly decline reached 9.3% after a 3.3% increase, significantly worse than the expected –0.3%. Today, European investors and forex traders will focus on the Bundesbank’s monthly report at 13:00 (GMT+2) and the minutes of the ECB’s latest policy meeting at 14:30 (GMT+2). In December, the ECB kept its key interest rate unchanged at 2.15% and the deposit rate at 2.00% for the fourth consecutive time. The regulator’s next meeting is scheduled for February 5.
GBP/USD
The British pound is trading near flat against the US dollar and is inclined toward developing a corrective impulse following yesterday’s movement, testing the 1.3430 level for a potential downside breakout. Investors remain cautious, awaiting new market drivers and closely monitoring the rhetoric of US President Donald Trump. Markets were shaken by the renewed territorial dispute over Greenland. The US president continues to demand full control over the island, arguing that Denmark and its European NATO allies cannot ensure sufficient security in the Arctic, where China and Russia are expanding their presence. Several European countries opposed to a potential US acquisition of Greenland deployed military forces to the island, prompting Washington to tighten trade conditions by announcing new 10.0% tariffs from February 1 on selected EU members and the United Kingdom, with the rate possibly rising to 25.0% from June 1.
During the World Economic Forum in Davos, Trump reiterated his claims but stressed that he does not currently consider military action, somewhat easing market tensions. The fragile state of the EU and UK economies leaves little room for a new round of trade confrontation. Moreover, Britain faces additional tariff pressure from the EU. Late yesterday, it was revealed that the planned introduction of tariffs on goods worth approximately $50.0 billion has been postponed. According to Trump, this decision followed a framework agreement reached with NATO Secretary General Mark Rutte regarding Greenland’s future status within NATO.
Macroeconomic data from the UK also weighed on the pound. Annual CPI inflation accelerated from 3.2% to 3.4% in December versus expectations of 3.3%, while monthly inflation rose from –0.2% to 0.4%. Core CPI remained unchanged at 3.2%. Although elevated inflation could theoretically support the pound by keeping interest rates higher for longer, the Bank of England has signaled it will not wait for inflation to return to its 2.0% target before easing policy, reinforcing concerns about the broader economic outlook.
AUD/USD
The Australian dollar is strengthening against the US dollar, consolidating near the 0.6800 level and fresh highs last seen in October 2024. Investor focus is on Australia’s labor market data, which supported bullish sentiment. Employment rose by 65.2K in December, more than double forecasts, following a decline of 28.7K in November. Full-time employment increased by 54.8K, part-time by 10.4K, while unemployment dropped sharply from 4.3% to 4.1% against expectations of 4.4%.
These strong figures allow the Reserve Bank of Australia to maintain its hawkish stance and keep interest rates elevated for longer. In the US, revised Q3 2025 GDP data and weekly jobless claims will be released at 15:30 (GMT+2), followed by the PCE price index at 17:00 (GMT+2). The Federal Reserve remains cautious, projecting only one rate cut in 2026, although markets expect at least two. Investors are also closely watching geopolitical developments surrounding Greenland.
USD/JPY
The USD/JPY pair shows moderate gains near 158.70, with attention centered on Japan’s foreign trade data. December exports slowed from 6.1% to 5.1%, while imports jumped from 1.3% to 5.3%, exceeding the 3.6% forecast. As a result, the trade surplus narrowed sharply from ¥322.2 billion to ¥105.7 billion, missing expectations of ¥357.0 billion.
In the US, PCE inflation data will be closely watched later today, potentially shaping expectations for Federal Reserve policy in 2026. Markets remain focused on escalating US–EU tensions over Greenland. Meanwhile, the yen is weakening amid rising political uncertainty in Japan, after Prime Minister Sanae Takaichi announced early parliamentary elections scheduled for February 8.
XAU/USD
Gold prices are retreating in early trading, testing the 4820.00 level for a potential downside breakout after pulling back from record highs. The decline follows an unexpected softening in President Trump’s stance on Greenland. Following talks with NATO Secretary General Mark Rutte, Trump canceled the planned February 1 tariff increase against several European countries, citing a framework agreement within NATO. Nevertheless, geopolitical uncertainty remains elevated, as negotiations continue and broader global tensions persist.
