Market Insight 20-01-2026

• Written by: Ian Morley
• 20/01/2026

Daily Currency Market Update – 20 January 2026

Market Overview

Safe‑haven demand dominated global markets on Tuesday as geopolitical tensions escalated further. President Trump intensified pressure on Europe, arguing that Denmark cannot adequately protect Greenland and threatening 200% tariffs on French wines and champagne if France refuses to join the “Gaza Board of Peace.”

The US Dollar weakened for a second session, with the USD Index slipping below 99.00, while US equity futures fell sharply between 1.2% and 1.6%. US markets reopen today after the long weekend, though the economic calendar remains light.

GBP/EUR

GBP/EUR slipped to 1.1480 following mixed UK labour market data.

Key drivers:

• UK unemployment held at 5.1%, above expectations of 5.0%.
• Claimant Count rose 17.9k, signalling ongoing labour market softness.
• The ECB continues to signal a steady policy stance, with no near‑term debate on further rate changes.
• Traders await UK CPI on Wednesday for clearer BoE direction.

Outlook: GBP/EUR may remain under pressure unless UK inflation surprises to the upside.

GBP/USD

GBP/USD climbed toward 1.3490, supported by broad USD weakness.

Drivers:

• UK employment data showed 82k jobs added, offsetting October’s decline.
• Wage growth cooled slightly, reinforcing expectations of BoE rate cuts later this year.
• The Dollar weakened sharply as US–EU tensions over Greenland triggered a “Sell America” move.
• Analysts warn prolonged tariff disputes could erode confidence in US leadership and US assets.

Outlook: GBP/USD remains supported while USD sentiment deteriorates. UK CPI tomorrow is the next major catalyst.

EUR/USD

EUR/USD rallied to 1.1730, gaining more than 1% over two days.

Key factors:

• Trump’s tariff threats triggered a broad USD sell‑off.
• German PPI fell 0.2% m/m, deepening deflationary pressures.
• Markets await the German ZEW survey, expected to rise to 50, the strongest since July 2025.
• Eurozone leaders meet in Brussels to coordinate a response to US tariff threats.

Outlook: EUR/USD momentum remains bullish while USD sentiment stays fragile.

AUD/USD

AUD/USD extended gains, supported by strong domestic and Chinese data.

Drivers:

• Australia’s TD‑MI Inflation Gauge rose to 3.5% y/y, with monthly inflation at 1.0%, the fastest since 2023.
• China’s Q4 GDP beat expectations at 1.2% q/q, with industrial production rising 5.2% y/y.
• The PBOC left LPRs unchanged at 3.00% and 3.50%.
• USD weakness amid US–Greenland tensions boosted AUD demand.

Outlook: AUD/USD remains constructive, with China’s momentum and domestic inflation supporting the Aussie.

USD/CAD

USD/CAD steadied near 1.3870, after Monday’s decline.

Key drivers:

• CAD weakened as oil prices slipped to $59.30, pressured by US–EU tensions clouding global demand.
• USD downside limited by delayed expectations for Fed rate cuts (now June and September).
• Canada’s CPI (released Monday) rose to 2.4% y/y, above expectations.

Outlook: USD/CAD may remain range‑bound; oil direction and USD sentiment remain key.

USD/CHF

USD/CHF softened to ~0.7960, extending its decline.

Drivers:

• Safe‑haven demand for CHF surged as Trump’s tariff threats intensified geopolitical uncertainty.
• EU leaders warned of a “dangerous downward spiral” in transatlantic relations.
• SNB Chairman Schlegel’s speech at Davos later today may offer policy insight.

Outlook: USD/CHF likely to remain pressured unless geopolitical tensions ease.

Final Summary

Markets remain on edge as US–EU tensions escalate over Greenland, driving safe‑haven flows into gold and CHF while weighing heavily on the US Dollar. Sterling strengthened against the Dollar but softened versus the Euro after mixed UK employment data. The Euro rallied strongly on USD weakness, while the Australian Dollar benefited from robust domestic and Chinese data. CAD stabilised despite weaker oil, and CHF continued to outperform.