Monetary & Foreign exchange Market Recap: Jan. 22, 2026

Markets rallied on Thursday as geopolitical tensions eased following President Trump’s withdrawal of threatened tariffs in opposition to European allies, whereas stable US financial information bolstered expectations for the Federal Reserve to take care of its cautious method to coverage changes.

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Foreign exchange Information Headlines & Information:

• New Zealand Digital Retail Card Spending for December 2025: -1.0% y/y (1.8% y/y forecast; 1.6% y/y earlier)
• New Zealand Customer Arrivals for November 2025: 8.2% y/y (4.0% y/y forecast; 9.4% y/y earlier)
• Japan Stability of Commerce for December 2025: 105.7B (-400.0B forecast; 322.2B earlier)
• Australia Employment Change for December 2025: 65.2k (40.0k forecast; -21.3k earlier)
  • Australia Unemployment Fee for December 2025: 4.1% (4.4% forecast; 4.3% earlier)
• Canada CFIB Enterprise Barometer for January 2026: 59.5 (59.5 forecast; 59.9 earlier)
• Canada New Housing Worth Index for December 2025: -0.2% m/m (0.1% m/m forecast; 0.0% m/m earlier)
• U.S. GDP Progress Fee for September 30, 2025: 4.4% q/q (4.3% q/q forecast; 3.8% q/q earlier)
• U.S. Preliminary Jobless Claims for January 17, 2026: 200.0k (195.0k forecast; 198.0k earlier)
• Euro space Client Confidence Flash for January 2026: -12.4 (-13.6 forecast; -13.1 earlier)
• U.S. Core PCE Worth Index for November 2025: 0.2% m/m (0.1% m/m forecast; 0.2% m/m earlier); 2.8% y/y (2.7% y/y forecast; 2.7% y/y earlier)
• U.S. Private Earnings for November 2025: 0.3% m/m (0.3% m/m forecast; 0.1% m/m earlier)
• U.S. Kansas Fed Manufacturing Index for January 2026: -2.0 (5.0 forecast; -3.0 earlier)
• EIA Crude Oil Shares Change for January 16, 2026: 3.6M (3.39M earlier)

Broad Market Worth Motion:

Thursday’s session delivered a broad risk-on tone as President Trump’s retreat from threatened European tariffs sparked aid throughout international markets, whereas sturdy US financial information bolstered the view that the financial system stays resilient regardless of elevated inflation.

Gold rallied strongly, climbing 1.89% to shut round $4,923 per ounce. The valuable metallic prolonged its outstanding run to contemporary all-time highs, having touched $4,888 on Tuesday amid the preliminary Greenland tensions. Gold’s energy all through the session doubtless mirrored a mix of things, together with ongoing safe-haven demand regardless of easing geopolitical tensions, persistent considerations about fiscal coverage and Fed independence, and positioning forward of the Financial institution of Japan’s extremely anticipated charge resolution scheduled for Friday morning. The continued advance regardless of the risk-on tone in equities prompt institutional accumulation and portfolio diversification flows stay supportive.

The S&P 500 posted positive factors of 0.38% to settle close to 6,909, recovering from earlier weak spot as merchants embraced the de-escalation of transatlantic tensions. The index opened with a slight hole increased following Trump’s in a single day announcement of a framework cope with NATO on Arctic safety, then traded principally sideways by means of the Asian and early London classes round 6,900. Following the 8:30 am ET information releases displaying better-than-expected GDP development and in-line PCE inflation, the index initially dipped earlier than discovering help and grinding increased by means of the afternoon. Mega-cap know-how shares led the advance, with notable energy in synthetic intelligence-related names. Small-cap shares continued their outperformance, marking the 14th consecutive session of relative energy versus large-caps, suggesting ongoing expectations for charge cuts and improved financing circumstances benefiting smaller corporations.

Bitcoin declined 0.82% to commerce close to $89,443, underperforming conventional threat belongings regardless of the broader market rally. The cryptocurrency exhibited a risky session, leaning damaging by means of Asia and London, earlier than shifting sharply decrease following the US financial information releases. The weak spot accelerated by means of the London shut, with Bitcoin dropping to session lows round $88,400 earlier than stabilizing into the US afternoon and rebounding forward of the shut. The divergence from equities doubtless mirrored profit-taking after current positive factors and presumably considerations that stronger financial information supporting a higher-for-longer Fed coverage stance might scale back speculative urge for food for non-yielding digital belongings.

WTI crude oil fell 1.80% to shut round $59.36 per barrel, extending losses from the earlier session. The decline could have been some response to Ukrainian President Zelenskiy’s feedback about progress towards peace negotiations with Russia, together with experiences {that a} 20-point peace plan is 90% full pending enter from Trump and Russian officers. The prospect of diminished geopolitical threat premium and probably elevated Russian oil flows if sanctions are finally lifted doubtless weighed on costs. We additionally noticed a larger-than-expected 3.6 million barrel construct in EIA crude inventories, probably including to the strain.

Treasury yields edged up 0.05% to roughly 4.20%, with the 10-year word displaying modest upward strain by means of a lot of the session. Yields traded comparatively flat by means of the Asian session earlier than rising step by step following the 8:30 am ET information releases. The upward transfer doubtless mirrored the market’s reassessment that stronger GDP development and sticky core PCE inflation help the Federal Reserve’s affected person method to additional charge cuts. Two-year yields climbed extra noticeably, steepening the yield curve barely as merchants pushed again expectations for near-term Fed easing, with charge lower odds for the January 27-28 FOMC assembly remaining minimal.

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FX Market Conduct: U.S. Greenback vs. Majors

Overlay of USD vs. Majors Foreign exchange Chart by TradingView

The US greenback traded underneath sustained strain on Thursday, in the end closing because the second-worst performing main foreign money with solely a marginal acquire in opposition to the Japanese yen, as merchants reassessed the de-escalation of geopolitical tensions and digested stable US financial information.

Through the Asian session, the greenback initially traded with a internet bullish lean as Trump’s in a single day announcement of a framework cope with NATO concerning Greenland diminished fears of proudly owning U.S. belongings. However we noticed a fast cap and switch decrease throughout mid-morning Asian buying and selling hours, presumably on an enchancment in threat urge for food as transatlantic tensions declined. Australia’s stronger-than-expected employment information, displaying 65,200 jobs added versus 40,000 forecast and unemployment falling to 4.1% from 4.3%, presumably supplied specific help to the Australian greenback, which emerged because the session’s prime performer.

The London session noticed the greenback’s weak spot persist and deepen regardless of European information that got here in combined. UK CBI Distributive Trades confirmed a much less damaging studying than anticipated at -17 versus -57 forecast, offering modest help to sterling. Euro space Client Confidence additionally improved greater than anticipated to -12.4 from -13.1. Nevertheless, these regional information factors didn’t stem the greenback’s decline, which continued steadily decrease by means of the European morning. The dollar’s incapability to search out help prompt the geopolitical de-escalation was the dominant driver, with merchants unwinding safe-haven positioning constructed in the course of the prior days’ Greenland tensions.

The US session introduced accelerated greenback weak spot following the 8:30 am ET information releases, regardless of the headline figures showing superficially supportive for the dollar. The up to date Q3 GDP estimate of 4.4% annualized development versus 4.3% anticipated, mixed with in-line November PCE inflation readings, appeared to don’t have any impact on bearish greenback sentiment. Additionally, preliminary jobless claims of 200,000 got here in above the 195,000 forecast, suggesting some cooling on the margin in labor market circumstances. The greenback continued to see weak spot intensified by means of the mid-morning hours and promoting strain persisting into the afternoon shut. The transfer doubtless mirrored positioning changes as markets priced diminished geopolitical threat premium over stable U.S. development information. 

At Thursday’s shut, the US greenback posted internet losses in opposition to all main currencies besides the Japanese yen, the place it managed a marginal 0.10% acquire. The greenback’s weak spot appeared to replicate a mix of diminished safe-haven demand following Trump’s tariff retreat, robust commodity-linked foreign money efficiency, and market positioning forward of the Financial institution of Japan’s charge resolution early Friday morning, which might spark additional yen volatility and greenback weak spot if the BOJ delivers a hawkish hike.

Upcoming Potential Catalysts on the Financial Calendar

• New Zealand CPI Progress Fee for December 31, 2025 at 9:45 pm GMT
• Australia S&P International Manufacturing & Companies PMI Flash for January 2026 at 10:00 pm GMT
• Japan CPI Progress Fee for December 2025 at 11:30 pm GMT
• U.Ok. Gfk Client Confidence for January 2026 at 12:01 am GMT
• Japan S&P International Manufacturing & Companies PMI Flash for January 2026 at 12:30 am GMT
• Japan BoJ Curiosity Fee Resolution for January 23, 2026 at 3:00 am GMT
• U.Ok. Retail Gross sales for December 2025 at 7:00 am GMT
• Euro space HCOB Manufacturing & Companies PMI Flash for January 2026 at 9:00 am GMT
• U.Ok. S&P International Manufacturing & Companies PMI Flash for January 2026 at 9:30 am GMT
• U.Ok. BoE Greene Speech at 9:30 am GMT
• European Central Financial institution President Lagarde Speech at 10:00 am GMT
• Canada Retail Gross sales Prel for December 2025 at 1:30 pm GMT
• U.S. S&P International Manufacturing & Companies PMI Flash for January 2026 at 2:45 pm GMT
• U.S. CB Main Index for November 2025
• U.S. UoM Client Sentiment Index for January 2026 at 3:00 pm GMT

Friday’s calendar is dominated by the Financial institution of Japan’s extremely anticipated coverage resolution at 3:00 am GMT, the place markets are awaiting affirmation of an anticipated charge hike and any alerts concerning the timing of future coverage normalization. Japanese CPI information releasing forward of the choice at 11:30 pm GMT Thursday will present essential context for the BOJ’s deliberations, with inflation traits doubtless influencing the central financial institution’s ahead steering.

Throughout European hours, UK retail gross sales at 7:00 am GMT will provide perception into client resilience heading into 2026, notably vital following current charge cuts from the Financial institution of England. The dense run of flash PMI information from the euro space and UK at 9:00 am and 9:30 am GMT respectively will present the primary January readings on manufacturing and providers sector momentum, with specific deal with whether or not the financial smooth patch is stabilizing or deteriorating additional.

The US session options preliminary retail gross sales information from Canada at 1:30 pm GMT alongside flash U.S. PMI readings for January at 2:45 pm GMT, which is able to provide early proof on whether or not the US financial system’s momentum is carrying into the brand new 12 months. The College of Michigan client sentiment survey at 3:00 pm GMT might be intently monitored for any shifts in inflation expectations that would affect Federal Reserve pondering heading into subsequent week’s FOMC assembly on January 27-28.

With central financial institution coverage, financial exercise indicators, and inflation expectations all in focus, Friday units the stage for what guarantees to be a risky begin to subsequent week’s important FOMC assembly.