• [gtranslate]

Market Insight 21-01-2026

  • Home
  • Market Insight 21-01-2026

Daily Currency Market Update – 21 January 2026

Market Overview

Markets turned cautious midweek as investors awaited President Trump’s keynote speech at the World Economic Forum in Davos, where he is expected to address EU–US trade tensions and the escalating dispute over Greenland.

US equities suffered heavy losses on Tuesday, with the Nasdaq and S&P 500 both falling more than 2%, while the US Dollar Index posted a second consecutive decline before stabilising above 98.50 early Wednesday.

UK inflation surprised to the upside, rising to 3.4% y/y in December, but GBP/USD showed little immediate reaction and remained below 1.3450. EUR/USD eased slightly after a two‑day rally but held above 1.1700. AUD/USD continued to trade firmly above 0.6750 ahead of Australia’s employment data.

GBP/EUR

GBP/EUR trades around 1.1460, with Sterling edging higher after UK CPI data.

Key drivers:

  • UK headline CPI rose to 3.4% y/y, above expectations of 3.3%.
  • Core CPI held at 3.2% y/y, in line with forecasts.
  • ECB President Lagarde warned that Trump’s tariff threats could challenge the Eurozone’s inflation and growth outlook.
  • ECB policymakers reiterated a steady, data‑dependent policy stance, offering mild EUR support.

Outlook: Friday’s UK Retail Sales will be the next major catalyst. A strong print could lift GBP/EUR in the near term.

GBP/USD

GBP/USD trades near 1.3445, supported by hotter UK inflation and broad USD softness.

Drivers:

  • UK CPI exceeded expectations, reinforcing the view that BoE rate cuts may be delayed.
  • Services inflation accelerated to 4.5% y/y, a key metric for the BoE.
  • The US Dollar remains under pressure amid strained US–EU relations over Greenland.
  • Markets await Trump’s Davos speech for clues on trade policy escalation.

Outlook: GBP/USD remains supported while USD sentiment stays fragile. UK Retail Sales and PMI data on Friday will shape BoE expectations.

EUR/USD

EUR/USD consolidates above 1.1710, pausing after a 1.2% rally over the previous two days.

Key factors:

  • The “Sell America” trade eased slightly ahead of Trump’s Davos appearance.
  • German ZEW sentiment surged to 59.6, the strongest in more than four years.
  • Investors expect Lagarde to reiterate a steady ECB stance later today.
  • Eurozone–US tensions remain elevated, with the European Parliament considering suspending the July trade deal.

Outlook: EUR/USD direction hinges on Trump’s speech. Any escalation could reignite USD selling.

AUD/USD

AUD/USD steadies near 0.6750, easing slightly after two days of gains.

Drivers:

  • Australia’s Westpac Leading Index rose 0.1% m/m, signalling continued recovery into early 2026.
  • RBA remains cautious as inflation stays above target, with the IMF urging vigilance.
  • China’s LPRs were left unchanged, while recent Chinese data (GDP, industrial production) remain supportive.
  • USD stabilisation limited AUD upside.

Outlook: AUD/USD will take direction from Thursday’s Australian employment data and broader USD sentiment.

USD/CAD

USD/CAD trades near 1.3835, posting modest gains.

Key drivers:

  • CAD pressured by softer oil prices, with WTI drifting toward $59.30.
  • Trump’s tariff threats could cap USD upside, as markets brace for renewed “Sell America” flows.
  • Canada’s CPI rose to 2.4% y/y, but core inflation moderated.
  • Markets assign an 88% probability of a BoC hold on 28 January.

Outlook: USD/CAD likely to remain range‑bound until Trump’s speech and BoC signals become clearer.

USD/CHF

USD/CHF rebounds to ~0.7910, halting a three‑day decline.

Drivers:

  • USD stabilised slightly despite ongoing US–EU tensions.
  • CHF remains supported by safe‑haven demand as Europe prepares potential tariffs on $93bn of US goods.
  • Swiss PPI and import prices fell 1.8% y/y, marking the sharpest deflation since September.
  • Markets await SNB Chairman Schlegel’s remarks at Davos.

Outlook: USD/CHF may soften again if Trump escalates tariff threats or if risk aversion intensifies.

Final Summary

Markets remain on edge ahead of President Trump’s Davos speech, with the Dollar stabilising after two days of heavy selling. Sterling gained modestly on stronger UK inflation, while the Euro held firm after a strong ZEW reading. The Australian Dollar steadied ahead of key employment data, CAD softened on weaker oil, and CHF remained supported by safe‑haven flows.