Tuesday morning trading remained cautious as full markets reopened after Monday’s U.S. holiday. The mood was shaped by geopolitical developments around Greenland, China’s soybean purchases from the U.S., and fresh comments from Donald Trump, which revived market fears ahead of key data from major economies. Overall, it was a wait-and-see session with limited data and muted activity.
In China, the People’s Bank of China (PBOC) kept the one-year and five-year Loan Prime Rates (LPRs) unchanged for the eighth consecutive month, in line with expectations. This confirmed a preference for targeted easing, with broader rate cuts still expected later in the first quarter (Q1) or second quarter (Q2). The USDCNY reference rate was set at its strongest level since May 18, 2023, pushing USDCNH lower.
Separately, China purchased around 12 million tonnes of U.S. soybeans over the past three months, fulfilling a key trade pledge under the Trump administration, while still keeping Brazil as an alternative supplier.
On geopolitics, CNN reported that Donald Trump told UK Prime Minister Keir Starmer he may have received “bad information” on European troop deployments to Greenland, opening the door to de-escalation. However, broader U.S.–Europe tensions persist. Trump reiterated that the U.S. “has to have Greenland,” linking the issue to his proposed “Board of Peace,” a task force tied to Gaza governance.
Global leaders fear this could undermine existing international systems, including the United Nations. Comments involving French President Emmanuel Macron were widely doubted, as Macron has already rejected Trump’s invitation, and U.S.–EU relations remain strained. Tariff threats toward the European Union (EU) added to skepticism.
Uncertainty also continues over the next Federal Reserve (Fed) Chair. Kevin Hassett and Kevin Waller remain the leading candidates, with Hassett seen as closer to Trump, while Waller’s support is growing. Trump has not yet given any clear signals.
In Venezuela, acting president Delcy Rodríguez announced plans to boost gold and iron ore production and attract foreign investment to earn foreign exchange. She is also promoting broader reforms in the resource sector amid increased U.S. pressure following recent political changes.
Monday’s U.S. holiday reduced trading volumes, but markets focused on Trump’s threat to impose tariffs on several EU countries if the U.S. is not granted Greenland. Stock futures fell up to 1.2% before recovering modestly. The U.S. Dollar eased as concerns grew over large USD holdings in Europe and the risk of a deeper transatlantic split, with attention on possible responses from Congress.
On Monday, the key data release was the Canadian Consumer Price Index (CPI). Headline inflation was strong, while core readings were softer. Rising airfares and restaurant prices signaled a resilient consumer, yet the Canadian Dollar, also called the loonie, underperformed other commodity currencies, partly due to U.S.–Canada trade tensions. Markets slightly increased the odds of a rate hike this year. Year-on-year, restaurant prices were the largest contributor to CPI growth, while grocery prices rose 5.0% y/y.
Geopolitical risks supported precious metals, with gold hitting a new record and silver nearing $95 per ounce, while Bitcoin lagged as risk aversion weighed on cryptocurrencies.
Croatian central banker Boris Vujcic was selected as the next Vice President of the European Central Bank (ECB). A moderate hawk, he has served as Governor of Croatia’s central bank since 2012 and successfully guided the country into the euro in 2023, making him a continuity choice.
In Japan, the yen traded in a tight range, but pressure built in the bond market. The 40-year Japanese Government Bond (JGB) yield hit 4%, the highest since its launch in 2007, and the first time in over 30 years that any Japanese sovereign yield reached that level. The move reflected a JGB sell-off driven by fiscal concerns, including proposals to cut the food sales tax. The Centrist Reform Alliance suggested funding a zero food tax through a government-linked fund, adding to investor unease. Meanwhile, the Bank of Japan (BOJ) is expected to keep rates steady while signaling a tightening bias, as yen weakness and fiscal risks lift inflation concerns.
In New Zealand, the services sector returned to expansion in December, with the Performance of Services Index (PSI) rising to 51.5, ending a 21-month contraction. This followed a rebound in the Manufacturing Purchasing Managers’ Index (PMI), pointing to economic stabilization. NZDUSD and AUDUSD moved higher on the data and improved risk sentiment.
Amid these plays, the U.S. Dollar Index (DXY) extended its pullback, allowing EURUSD and GBPUSD to edge higher and supporting gains in gold, silver, and the Japanese Yen (JPY). NZDUSD rose on strong data and a softer USD, AUDUSD gained on China-linked optimism, and USDCAD found support from Canadian inflation and improved global ties. Cryptocurrencies drifted lower, Asia-Pacific equities posted modest losses, and Japanese Treasury bond yields stayed near multi-year highs.
Despite lingering concerns around Greenland and the appointment of the new European Central Bank (ECB) Vice President, Croatian central banker Boris Vujcic, EURUSD manages to hold on to Monday’s recovery as the U.S. Dollar weakens broadly. The pair is further supported by dovish expectations around the Federal Reserve (Fed) during the Federal Open Market Committee (FOMC) blackout period.
In contrast, USDJPY faces pressure from hawkish Bank of Japan (BoJ) expectations, rising Japanese Government Bond (JGB) yields, and plans for fiscal stimulus under the Japanese Prime Minister ahead of a snap election aimed at tightening political control. The Japanese Yen (JPY) also benefits from its safe-haven appeal and a softer USD, allowing the pair to challenge the previous day’s rebound from a one-week low.
A cautious mood ahead of the UK employment data and the U.S. ADP Employment Change four-week average, combined with a softer USD, supports GBP/USD despite lingering fears around Greenland that weigh on British leaders. At the same time, concerns over the Bank of England’s (BoE) ability to defend the economy raise doubts about the Cable pair’s recent gains, even as the weaker USD allows sellers to pause after two straight days of declines.
Be it the U.S. Dollar weakness or China-linked optimism, not to forget upbeat commodity prices, Antipodeans like AUDUSD and NZDUSD edge higher, while USDCAD dropped further. Meanwhile, New Zealand’s strongest services PMI in nearly two years, joined upbeat Canada inflation data and improving Canadian ties with global trade partners, as well as upbeat crude oil prices, offered additional strengths to the AUD and the CAD.
A softer U.S. Dollar and a strong shift toward traditional safe havens push gold and silver to fresh record highs, while crude oil extends its recovery from a one-week high. Weak confidence in the USD, especially amid Federal Reserve (Fed) indecision and Donald Trump-related uncertainty, further supports the upside in gold and silver. At the same time, geopolitical tensions involving Venezuela, Russia, Iran, and Greenland help keep West Texas Intermediate (WTI) crude oil prices firm.
Digital assets and equities fail to benefit from a softer USD and fall for a second straight day as full markets reopen amid broad risk aversion. Additional downside pressure on Bitcoin (BTC), Ethereum (ETH), and Asia-Pacific equities comes from firmer Treasury bond yields.
As full markets return, Tuesday’s calendar features UK Employment data, European Union (EU) ZEW Sentiment, a speech by the Swiss National Bank (SNB) Chairman, and the U.S. ADP Employment Change.
Despite the U.S. Dollar pullback amid risk aversion, stronger U.S. data or supportive Federal Reserve (Fed) remarks could trigger a short-term rebound in the Greenback. This may slow the recent recovery in major currencies and crude oil and add further downside pressure on cryptocurrencies. GBPUSD could gain support from positive UK employment figures, but may struggle to extend gains during the U.S. session if the ADP data prints stronger.
Meanwhile, Wall Street indices may post mild gains if recent positive developments around Greenland and China’s soybean purchases receive confirmation. However, gold, silver, and the Japanese Yen (JPY) are likely to remain supported by their safe-haven appeal and ongoing Bank of Japan (BoJ) concerns.
May the trading luck be with you!
