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Market Insight 22-01-2026

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  • Market Insight 22-01-2026

Daily Currency Market Update – 22 January 2026

Market Overview

Risk sentiment improved sharply mid‑week as tensions between the US and EU eased. President Trump confirmed that Washington and NATO had agreed on a “framework of a future deal” regarding Greenland, and that the 10% tariffs scheduled for 1 February would not be imposed. Markets responded positively, with Wall Street rebounding more than 1% on Wednesday and US equity futures holding modest gains early Thursday.

The US Dollar stabilised after a two‑day decline, with the USD Index trading quietly below 99.00. Attention now turns to a heavy US data slate, including Q3 GDP revisions, PCE inflation for October–November, and Initial Jobless Claims.

Australia delivered a strong labour market surprise, boosting AUD/USD above 0.6800, its highest level since October 2024.

GBP/EUR

GBP/EUR trades around 1.1490, stabilising after recent volatility.

Key drivers:

  • UK CPI rose to 3.4% y/y, slightly above expectations.
  • Core CPI held at 3.2%, marginally below consensus.
  • Bond markets calmed, with UK 10‑year yields easing back to 4.42%.
  • Eurozone sentiment improved, with the ZEW index rising to 40.8, its strongest since July 2024.

Analysts note that UK inflation is likely to fall sharply from April as utility‑based price rises moderate. ING expects headline CPI to dip to 2%, potentially unlocking BoE cuts in March and June. MUFG sees scope for a March cut given ongoing labour market weakness.

Outlook: GBP/EUR remains vulnerable if equities retreat again. Friday’s UK Retail Sales will be the key domestic catalyst.

GBP/USD

GBP/USD trades near 1.3450, supported by easing geopolitical tensions and softer USD demand.

Drivers:

  • UK inflation surprised to the upside, but economists expect disinflation to accelerate in coming months.
  • NIESR expects one BoE rate cut in H1, noting the Bank is “not worried” by the latest CPI print.
  • Trump’s rollback of tariffs and abandonment of military action over Greenland improved risk appetite and weighed on the Dollar.
  • Markets await US PCE inflation and flash PMIs on Friday.

Outlook: GBP/USD may remain range‑bound until US data hits. UK Retail Sales and PMIs will shape BoE expectations.

EUR/USD

EUR/USD consolidates below 1.1700, steady after Wednesday’s pullback.

Key factors:

  • Trump’s softer tone at Davos eased the “Sell America” trade.
  • Investors shift focus back to fundamentals: US PCE inflation and Q3 GDP.
  • ECB Meeting Accounts and German Bundesbank commentary due today.
  • Eurozone consumer confidence data expected to show modest improvement.

Outlook: EUR/USD likely to remain stable unless US data surprises significantly.

AUD/USD

AUD/USD rallies to ~0.6810, extending a four‑day winning streak.

Supportive factors:

  • Australia added 65.2k jobs in December, far exceeding expectations.
  • Unemployment fell to 4.1%, beating forecasts of 4.4%.
  • Strong labour data boosts expectations of potential RBA tightening.
  • Earlier USD weakness from US–EU tensions had already lifted the Aussie.

Outlook: AUD/USD remains constructive. Friday’s Australia–US PMIs will guide near‑term direction.

USD/CAD

USD/CAD trades around 1.3830, weaker for a fourth session.

Drivers:

  • CAD strengthened as WTI held above $60.50, supported by easing geopolitical tensions.
  • Oil gains were tempered by oversupply concerns, with US crude inventories rising 3 million barrels.
  • Trump’s rollback of tariffs reduced downside risks to global demand.
  • US Dollar steadied but remains vulnerable to renewed “Sell America” flows.

Outlook: USD/CAD direction hinges on US data today. BoC expected to hold rates on 28 January.

USD/CHF

USD/CHF holds near 0.7950, maintaining Wednesday’s recovery.

Key points:

  • Risk appetite improved as US–EU tensions cooled.
  • Trump confirmed no military action and withdrew tariff threats.
  • SNB’s Schlegel warned of possible negative inflation prints this year but said this would not be problematic.
  • CHF underperformed antipodeans but remained firm against the USD.

Outlook: USD/CHF may soften again if risk sentiment deteriorates or if US data disappoints.

Final Summary

Market sentiment improved as US–EU tensions eased, lifting equities and stabilising the Dollar. Sterling held firm after hotter UK inflation, while the Euro consolidated ahead of ECB minutes. The Australian Dollar outperformed on strong employment data, CAD strengthened on firmer oil, and CHF steadied after recent safe‑haven flows. Attention now turns to US PCE inflation, GDP revisions, and jobless claims for the next directional cues.