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20/01/2026 - 08:27 UTCThe USDX is extending its decline for a second consecutive session, trading near 98.90 during Tuesday’s Asian hours and recording a move of approximately 0.48% lower so far this week as of Tuesday 05:40 AM GMT. The Greenback is under pressure as risk aversion intensifies due to escalating trade tensions between the United States and the European Union. The rift centers on President Donald Trump’s weekend announcement of a 10% tariff on goods from eight European nations—including France, Germany, and the UK—effective February 1, as leverage for the purchase of Greenland. In response, EU ambassadors have begun coordinating retaliatory measures. French President Emmanuel Macron has notably urged the bloc to activate its Anti-Coercion Instrument (ACI), which could severely restrict US access to European markets and public tenders. Compounding the dollar's weakness is a shift in monetary policy expectations. While recent labor data remains resilient, it has prompted major institutions like Morgan Stanley to push back forecasts for the next Federal Reserve rate cut to June.
This geopolitical friction is spilling over into regional markets, which extended their decline on Tuesday as risk appetite remains suppressed by the Washington-Brussels dispute. Despite the US holiday, the main US equity indices moved lower in futures trading as investors monitored the escalating rhetoric. The China SSE fell -0.10% and the China SZSE dropped -0.95%, with mainland indices struggling for momentum despite recent GDP data confirming the 2025 growth target of 5% was met. In Hong Kong, the Hong Kong 50 moved down -0.05%, remaining under pressure alongside its regional peers. Meanwhile, the Japan 225 declined -0.61% following Prime Minister Sanae Takaichi's announcement of a snap election in February. While the prospect of further fiscal stimulus initially provided support, concerns over funding and rising bond yields with the 10-year reaching a 27-year high triggered a sell-off.
On the commodities front, oil prices rose on Tuesday as demand optimism was bolstered by resilient economic data from China, which showed the world’s top importer met its 5% growth target for 2025. This strength was supported by record-high Chinese refinery throughput and a weakening USDX, which fell as markets reacted to escalating trade friction over the Greenland dispute. Meanwhile, Gold hit new record levels, recording a move of 0.91% up early Tuesday at 05:52 AM GMT. The yellow metal continues to find support from safe-haven demand fueled by the protracted Russia-Ukraine conflict and fears of a transatlantic trade war. Traders are now largely focused on Thursday's US PCE Price Index release for clearer signals on the Federal Reserve's interest rate trajectory.
US stock index futures retreated as the week began, with the US 500 and US Tech 100 futures falling 0.38% and 0.35% respectively. The decline was fueled by heightened geopolitical uncertainty. Trading volumes remained light due to the Martin Luther King Jr. Day holiday, yet investors are bracing for a high-profile earnings week to gauge corporate health. Among the companies reporting, Netflix remained almost unchanged in recent trading as markets await its December quarter results, while 3M recorded a move of -1.95% ahead of its Tuesday disclosure. Other major firms set to report later this week include Johnson & Johnson, Intel, and General Electric, which will provide further clarity on the world's largest economy following last week's mixed banking results.
In the week ahead, market focus is expected to shift toward critical US economic indicators and the Bank of Japan's latest policy decision. Key US reports include the final GDP for the third quarter and the Core PCE Price Index—the Federal Reserve's preferred inflation gauge—both scheduled for Thursday, followed by the Flash Manufacturing and Services PMIs on Friday. Investors will also be monitoring a scheduled speech by President Trump on Wednesday for potential policy signals.
EUR/USD extended its advance on Monday as investors sold the US Dollar amid escalating trade tensions between the United States and the European Union. Heightened risk aversion followed President Donald Trump’s decision to intensify trade measures against several European countries, driving the pair above the 1.1640 level.
Global markets opened the week in a risk-off mood after the White House announced new tariffs set to take effect on February 1 against eight European nations, linked to ongoing disputes surrounding Greenland. President Trump warned that failure to reach an agreement would result in significantly higher duties starting June 1, targeting Denmark, Norway, Sweden, France, Germany, the Netherlands, and the United Kingdom.
The announcement weighed heavily on the US Dollar, echoing market reactions seen during previous trade escalations. US economic data offered little support for the Dollar, as the domestic calendar remained quiet. In addition, Federal Reserve officials have entered their pre-meeting blackout period ahead of the January policy decision, limiting fresh guidance on interest rates.
On the European front, reports suggest the EU is considering retaliatory measures, including tariffs worth up to €93 billion on US goods. Policymakers are also said to be discussing broader responses that could restrict access for American firms to the European market, underscoring the bloc’s increasingly firm stance.
Attention now turns to developments from the World Economic Forum in Davos, alongside key European events including Germany’s Producer Price Index and meetings of EU finance ministers. In the US, traders will monitor labor-market indicators, including the ADP Employment Change data, for further direction.
Gold prices extended their rally for a second consecutive session on Tuesday, breaking above the $4,700 level to set a new all-time high during Asian trading. The precious metal continues to draw strong safe-haven flows as geopolitical tensions and mounting trade war concerns keep investors on edge.
Ongoing hostilities between Russia and Ukraine remain a key source of uncertainty, sustaining demand for defensive assets despite easing fears of direct US involvement in Iran following a recent reduction in civil unrest. At the same time, renewed trade tensions between the United States and Europe—sparked by disputes surrounding Greenland—have further undermined risk appetite, lending additional support to Gold.
Gold’s advance has also been supported by renewed selling pressure on the US Dollar. President Donald Trump’s latest tariff threats have revived the so-called “Sell America” narrative, weighing on the greenback even as expectations for aggressive Federal Reserve easing have moderated.
Geopolitical risks remain elevated after Russia launched a new wave of drone and missile attacks on Ukraine’s energy infrastructure, triggering widespread power outages amid freezing temperatures. Developments on the trade front have also kept markets unsettled, with the threat of fresh US tariffs on European imports raising the prospect of retaliatory measures from the EU.
Looking ahead, attention will turn to Thursday’s release of the US Personal Consumption Expenditure (PCE) Price Index, the Federal Reserve’s preferred inflation gauge.
Oil prices moved slightly higher early on Tuesday, supported by stronger-than-expected economic growth data from China, which lifted optimism around global demand. Markets also remained attentive to rising geopolitical and trade risks after US President Donald Trump reiterated threats to impose higher tariffs on several European countries amid tensions linked to Greenland.
Oil prices drew support from encouraging signals out of China, the world’s largest crude importer. Official data released on Monday showed the Chinese economy grew 5.0% last year, meeting the government’s target. Further supporting sentiment, China’s refinery throughput rose 4.1% year-on-year in 2025, while crude oil output increased 1.5%, with both reaching record highs.
Concerns over a renewed trade war also remained in focus after President Trump said he would impose additional 10% tariffs from February 1 on imports from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland and the UK, with duties rising to 25% by June 1 if no agreement over Greenland is reached.
Markets are also monitoring developments in Venezuela’s oil sector after Trump said the US would take control of the industry following the capture of President Nicolás Maduro.
In addition, China is reportedly importing its largest volumes of Russian Urals crude since 2023, taking advantage of discounted prices after India sharply reduced purchases amid Western sanctions and ahead of a potential European Union ban on products refined from Russian oil.
US stock index futures declined on Monday evening after President Donald Trump reaffirmed his demands for US ownership of Greenland, keeping geopolitical uncertainty firmly in focus. Investor caution was also heightened ahead of a busy week of corporate earnings, while trading activity remained subdued due to the Martin Luther King Jr. Day holiday, during which US equity markets were closed.
Speaking Monday evening, Trump confirmed he will attend the World Economic Forum in Davos later this week and said he had agreed to meetings with “various parties” to discuss Greenland. He reiterated that US control of the island is critical to national security.
Beyond geopolitics, attention this week will turn to a heavy slate of December-quarter earnings, which could offer fresh insight into corporate health in the world’s largest economy.
Netflix and Johnson & Johnson are set to report results on Tuesday and Wednesday, respectively. Other notable companies reporting this week include 3M and US Bancorp on Tuesday, followed by Charles Schwab, Prologis, and Halliburton on Wednesday. GE Aerospace, Intel, Procter & Gamble, and Abbott Laboratories are scheduled to report later in the week.
Investors will be closely watching earnings results after major US banks delivered mixed performances last week. Despite the latest pullback, US equity futures remain near record highs following a strong, technology-led rally through late 2025 and early 2026.
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