The euro is rising amid ongoing geopolitical uncertainty and a noticeable easing of tensions surrounding Greenland. US President Donald Trump, following talks with NATO Secretary General Mark Rutte, abandoned plans to impose additional import tariffs on European countries that openly opposed the idea of the US “acquiring” the island. According to Trump, the meeting produced a “framework agreement” that would allow Washington to implement its Arctic plans while ensuring security. The decision to rule out forceful measures has strengthened the euro, allowing investors to refocus on economic factors.

Recent macroeconomic data from Germany’s IFO Institute were mixed and failed to significantly reinforce bullish sentiment. The business climate index stood at 87.6 in January versus expectations of 88.1. The current assessment index edged up from 85.6 to 95.7, while the expectations index slipped slightly from 89.7 to 89.5. Meanwhile, US data supported the dollar, as durable goods orders accelerated sharply, potentially signaling rising inflation risks. Capital goods orders jumped by 5.3% in November after a 2.1% decline previously, far exceeding the 0.5% forecast. Excluding defense and aircraft, orders increased from 0.3% to 0.7%.

Analysts believe the euro’s upward momentum may soon fade unless new drivers emerge. Investors are now focused on today’s speech by ECB President Christine Lagarde at 19:00 (GMT+2), which may reinforce hawkish rhetoric regarding possible policy easing in 2026. In the US, attention will turn to housing price indices at 16:00 and consumer confidence at 17:00 (GMT+2). Tomorrow, the Federal Reserve will hold its policy meeting, though no rate changes are expected.

GBP/USD

The British pound is trading with mixed dynamics near 1.3675, as market activity remains subdued ahead of the Federal Reserve’s policy decision. While no immediate policy changes are expected, recent macro data could influence the tone of Fed Chair Jerome Powell’s comments. Uncertainty remains elevated due to fragile trade relations and geopolitical risks.

The pound receives some support but remains pressured by expectations of rate cuts by the Bank of England. Last week, the BoE published its first “Forecast Evaluation Report,” admitting that inflationary pressures had been systematically underestimated since the pandemic. Two-year CPI forecasts were underestimated by around 2 percentage points, while wage forecasts were off by roughly 3 points. These findings reduce the likelihood of rapid monetary easing in 2026. Meanwhile, UK retail price data from the BRC showed inflation accelerating to 1.5% in January from 0.7%, reinforcing inflation concerns.

NZD/USD

The New Zealand dollar is edging lower near 0.5960 after retreating from recent highs. The pair had gained previously on easing geopolitical tensions around Greenland. The US dollar remains under pressure as investors seek safe-haven assets amid persistent geopolitical risks, particularly involving Iran.

Reports suggest Iran is preparing for a potential missile strike by the US and Israel, following the deployment of a carrier strike group led by the USS Abraham Lincoln. Although Washington has not confirmed such plans, concerns persist, particularly as China continues to purchase Iranian oil despite US sanctions. Strong New Zealand inflation data from last week, showing annual CPI rising to 3.1%, provide additional support to the kiwi, reinforcing expectations that the Reserve Bank of New Zealand will maintain current interest rates.

USD/JPY

The US dollar is showing corrective gains against the yen, rebounding from Monday’s decline and testing resistance near 154.50. Japan’s coincident and leading indicators for November weakened, while political uncertainty ahead of snap parliamentary elections on February 8 is weighing on the yen.

Prime Minister Sanae Takaichi dissolved parliament to capitalize on strong approval ratings, but markets fear fiscal expansion and rising debt, already above 250% of GDP. Expectations of delayed monetary tightening by the Bank of Japan and the risk of currency intervention continue to cap upside in USD/JPY.

XAU/USD

Gold is consolidating near 5060.00 as investors await the outcome of the Federal Reserve meeting. Although no policy changes are expected, any hint of concern over geopolitical risks or earlier easing could boost demand for safe-haven assets.

Gold continues to benefit from geopolitical tensions involving Iran, the Arctic region, and concerns over the independence of the Federal Reserve. Central banks remain major buyers, with Goldman Sachs forecasting average monthly purchases of 60 tons in 2026. The People’s Bank of China has extended its gold buying streak to 14 months, while Poland aims to raise its reserves to 700 tons. ETF inflows reached a record $89 billion in 2025, underscoring strong institutional and retail demand.