Recall that during his speech at the World Economic Forum in Davos, Switzerland, US President Donald Trump ruled out a military scenario regarding Greenland’s possible accession to the United States, and later отменил the introduction of additional import tariffs against a number of European countries from February 1. The shift in the White House’s rhetoric followed Trump’s meeting with NATO Secretary General Mark Rutte, after which Trump said a “framework agreement” was ready. Analysts believe Washington could try to use a model similar to the one currently applied to the UK on Cyprus, where British military bases are located and treated as sovereign UK territory. However, given current US–EU relations, some experts argue this would be difficult to implement. At the same time, Trump appears to be considering other scenarios: reports suggest he could pay each Greenland resident $1.0 million if they vote in favor of joining the US. European investors are watching activity data at 11:00 (GMT+2), which could further support the single currency. Forecasts suggest that Germany’s January PMI for manufacturing from S&P Global and Hamburg Commercial Bank (HCOB) will rise from 47.0 to 48.0, while services will edge up from 52.7 to 53.0. For the eurozone as a whole, the indices are expected to improve from 48.8 to 49.0 and from 52.4 to 52.8, respectively. Despite the anticipated pickup in activity, overall sentiment toward the European economy remains rather negative. Even without additional US tariffs, EU manufacturers struggle to compete globally against China, India, and other economies with lower labor costs. Investors also noted a sharp rise in public debt across the EU. Three countries—France, Poland, and Romania—set modern-era records: France’s debt-to-GDP rose to 117.7% in Q3 2025, while Poland’s and Romania’s increased to 58.1% and 58.9%, respectively. Meanwhile, Germany’s public debt reached 63.0% of GDP, the highest level since Q3 2023.

GBP/USD

The pound is strengthening against the US dollar, once again testing the 1.3500 area. Traders are assessing the UK’s December retail sales report: on a year-on-year basis, sales rose from 1.8% (revised from 0.6%) to 2.5%, while the month-on-month figure improved from –0.1% to 0.4% versus a forecast of –0.1%. Ex-fuel retail sales increased from 2.6% (revised from 1.2%) to 3.1% y/y and from –0.4% (revised from –0.2%) to 0.3% m/m, compared with preliminary estimates of 1.4% and –0.2%, respectively. At 11:30 (GMT+2), attention will turn to business activity data: investors currently expect services to tick up slightly from 51.4 to 51.7, while manufacturing is seen steady at 50.6. With the opening of the US session, focus will shift to US PMIs due at 16:45 (GMT+2): manufacturing is expected to edge up from 51.8 to 52.1 and services from 52.5 to 52.8. Stronger readings could further reduce expectations that the Federal Reserve will move faster with policy easing in 2026. For now, markets still price in two 25-bps rate cuts, with concrete steps expected only in the second half of the year, while officials’ projections imply just one cut. It is also worth noting that the Fed chair will change in May, as Jerome Powell steps down at the end of his second four-year term. Meanwhile, the UK’s January GfK consumer confidence index improved slightly from –17 to –16, as expected, having little impact on the pair. Geopolitical tensions have eased somewhat toward the end of the week. Earlier, Trump said he does not consider a military option for Greenland and also canceled new import tariffs against the EU and the UK from February 1 after talks with NATO Secretary General Mark Rutte, declaring a “framework agreement” that should ensure security in the Arctic.

AUD/USD

The Australian dollar is extending gains and is set to finish the week with record growth. The pair is testing the 0.6850 area for a breakout, updating the October 2024 highs. The strong bullish impulse was driven by robust labor market data, which increased the probability that the Reserve Bank of Australia (RBA) could tighten policy if inflation risks intensify further. Seasonally adjusted employment rose by 65.2K in December after –28.7K previously, well above the 30.0K forecast. Full-time employment increased by 54.8K and part-time by 10.4K. The seasonally adjusted unemployment rate fell sharply from 4.3% to 4.1% versus expectations of 4.4%. Today, markets are watching January business activity data: S&P Global’s manufacturing PMI rose from 51.6 to 52.4, services jumped from 51.5 to 56.0, and the composite index improved from 51.0 to 55.5. As the US session opens, attention will shift to US PMIs at 16:45 (GMT+2), with forecasts for manufacturing to rise from 51.8 to 52.1 and services from 52.5 to 52.8. At 17:00 (GMT+2), January inflation expectations from the University of Michigan are due; most analysts expect 4.2% for the one-year horizon and 3.4% for the five-year outlook. Investors also have the PCE price index report for October and November, released yesterday: the core y/y PCE accelerated from 2.7% to 2.8% in November, while the m/m pace held at 0.2%. The external fundamental backdrop is gradually calming: the topic of Greenland’s “purchase” has faded somewhat after Trump softened his rhetoric in Davos, saying he does not plan to use force and will not impose new tariffs on European countries, citing a preliminary agreement with NATO Secretary General Mark Rutte. Focus is now shifting back toward the Russia–Ukraine conflict. In the coming days, the parties plan a series of meetings, and initial trilateral contacts are not ruled out, which could signal some progress toward a diplomatic settlement.

USD/JPY

The US dollar is gaining against the yen, testing the 158.50 level for an upside break. The pair is set to end the week with moderate growth, gradually approaching the record highs seen last week. The yen came under notable pressure today after inflation data further weakened expectations that the Bank of Japan could return to a more hawkish stance in the near term. Japan’s headline CPI slowed from 2.9% to 2.1% in December, while the core measure excluding fresh food and energy stood at 2.9%. The index excluding fresh food, as expected, eased from 3.0% to 2.4%. Japan’s first policy meeting of 2026 took place today: as anticipated, officials kept the policy rate at 0.75% and indicated they would work to keep it at this level in the near term. Such rhetoric also weighed on expectations of a possible rate hike at the April meeting. Recall that last year the BOJ raised rates twice, taking them to 0.75%, the highest level in 30 years. Meanwhile, the BOJ upgraded its GDP growth forecast for 2025 from 0.7% to 0.9%, while inflation projections were left unchanged at 2.7%. For FY2026–FY2027, officials also expect faster growth of 1.0%, which is 0.3 percentage points higher than the previous estimate. JPY bulls were supported by activity data: the Jibun Bank manufacturing PMI rose from 50.0 to 51.5 in January, while services increased from 51.6 to 53.4. Geopolitical risks have eased toward Friday as Trump softened his tone at the Davos forum. After talks with NATO Secretary General Mark Rutte, he said he would not introduce new tariffs on European countries from February 1, citing a “framework agreement” on Greenland that should deliver the desired level of security in the region.

XAU/USD

XAU/USD is testing the 4,965.00 area in morning trading, supported by persistent geopolitical risks and printing new record highs, even as investors focus more on macro data and the outlook for further Fed rate cuts. Recall that during his speech at the World Economic Forum in Davos, Trump ruled out a military scenario regarding Greenland’s possible accession to the US, and later canceled additional import tariffs against a number of European countries from February 1. The change in tone followed his meeting with NATO Secretary General Mark Rutte, after which Trump said a “framework agreement” was ready. The main focus is gradually shifting toward the Russia–Ukraine conflict. In the coming days, the parties plan a series of meetings, and initial trilateral contacts are not ruled out, which could indicate some progress toward a diplomatic settlement. In the US, business activity data will be published today at 16:45 (GMT+2): the S&P Global manufacturing PMI for January is expected to rise from 51.8 to 52.1, while services are forecast to increase from 52.5 to 52.8. In addition, at 17:00 (GMT+2), the University of Michigan’s January inflation expectations will be released; most analysts expect 4.2% for the one-year outlook and 3.4% for the five-year horizon. Meanwhile, investors already have the PCE price index report for October and November released yesterday: the core y/y PCE accelerated from 2.7% to 2.8% in November, while the m/m pace remained unchanged at 0