Global financial markets trade cautiously early Monday after weekend headlines from the U.S. heightened geopolitical fears. Risk sentiment weakened as these concerns combined with mixed China data, developments in Japan, the Federal Open Market Committee (FOMC) blackout ahead of the January meeting, and the U.S. holiday, supporting safe-haven assets and prompting a pullback in the U.S. Dollar after a three-week uptrend.
U.S. markets are closed today for Martin Luther King Jr. Day on January 19, 2026. U.S. equity index futures opened lower on Globex and remained under pressure, while U.S. 10-year Treasury futures also traded lower.
Safe-haven demand followed President Donald Trump’s announcement of additional tariffs linked to the Greenland dispute. Gold and silver surged sharply, while U.S. stock markets fell after the weekend announcement.
During the weekend, Trump said that from February 1, 2026, Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands, and Finland will face a 10% tariff on all goods sent to the United States, rising to 25% from June 1, unless a deal is reached for the complete purchase of Greenland.
Europe and the UK signaled retaliatory tariffs while preferring negotiations, while European Council President Antonio Costa said an extraordinary EU leaders’ summit is likely on Thursday, January 22, after strong support emerged for Denmark and Greenland. An EU diplomat said suspended retaliatory tariffs worth €93 billion on U.S. goods will automatically return on February 6 if no agreement is reached. The euro edged lower. Separately, Spain reported at least 10 deaths in a high-speed train crash.
On Friday, Treasury yields rose 5–6 basis points after Trump suggested he wanted Kevin Hassett to remain in his current role, lowering betting odds on his appointment as Federal Reserve Chair to 17% and raising the prospect of less dovish leadership. The U.S. Dollar strengthened briefly, equities dipped modestly, and longer-dated yields surprised to the upside.
U.S. housing remained a weak point, highlighted by National Association of Home Builders (NAHB) data. Discussion continues around allowing Americans to access 401K retirement plans to buy homes amid affordability pressures, while higher long-term yields add further strain.
In China, the People’s Bank of China set the USDCNY fixing at 7.0051, the strongest since May 2023. December data showed ongoing property-sector stress, with new home prices falling again and resale prices posting their steepest decline in over a year.
China’s fourth-quarter (Q4) Gross Domestic Product (GDP) slowed to 4.5% year-on-year, the weakest since the post-COVID-19 reopening, even as full-year growth met the 5% target. Industrial production rose 5.2%, while retail sales slowed to 0.9%, highlighting weak domestic demand and an increasingly unbalanced recovery. China-related “national team” exchange-traded funds (ETFs) saw record outflows, iron ore fell for a fifth session on weaker steel output and new African supply, and China’s population declined again in 2025, deepening long-term growth and pension challenges.
In Japan, machinery orders fell 11% month-on-month in November, far exceeding expectations. Political focus shifted to a looming election, raising the likelihood of a temporary consumption tax cut, including scrapping the 8% food tax for two years. Bond markets reacted sharply, with 10-year Japanese Government Bond (JGB) yields hitting their highest levels since 1999. The Nikkei fell for a third session amid weak data, rising yields, Greenland-related tensions, and a firmer yen. A Japanese Prime Minister press conference is scheduled for 09:00 GMT.
In the UK, Rightmove said house asking prices rose 2.8% month-on-month in the four weeks to January 10, the strongest seasonal increase on record, lifting prices 0.5% year-on-year as supply reached its highest level for this time of year since 2014. Separately, the Resolution Foundation urged the government to accelerate structural reforms, citing tentative productivity improvements but warning that policy reversals have slowed progress since Prime Minister Keir Starmer’s election victory.
Amid these developments, the U.S. Dollar Index (DXY) pulls back from a six-week high after a three-week uptrend. This supports fresh record highs in Gold and Silver and puts downward pressure on USDJPY, especially amid mixed Japan news. At the same time, EURUSD, GBPUSD, AUDUSD, and NZDUSD rebound after a weak week, USDCAD eases following a three-week rise, and WTI crude oil edges higher after a four-week advance. In contrast, cryptocurrencies decline, and Asia-Pacific shares drift lower.
U.S. President Donald Trump’s threats toward Greenland and Denmark, along with the mixed UK developments mentioned earlier, contrast with the recent corrective bounce in EURUSD and GBPUSD. The pullback in the U.S. Dollar during the holiday may be driving these unexpected moves in major currencies, especially ahead of the European Union (EU) inflation data and the United Kingdom National Institute of Economic and Social Research (NIESR) GDP release.
Whether driven by U.S.-led geopolitical pressure or surging Japanese Government Bond (JGB) yields, alongside Bank of Japan (BoJ) rate hike concerns, Japan stimulus talk, and snap election fears, the Japanese Yen (JPY) has enough reasons to keep sellers cautious despite its recent loss of momentum. Even so, the yen pair remains far from challenging the broader bullish trend, as a firmer USD and China–Japan tensions persist, while worries that the Prime Minister’s snap election strategy could lead to more stimulus may further limit the BoJ’s ability to raise rates.
A softer U.S. Dollar offsets mostly weak China data and geopolitical risks, helping to stabilize AUDUSD and NZDUSD while putting downside pressure on USDCAD as the antipodean currencies post mild gains early Monday. Their corrective bounce is further supported by market consolidation during the U.S. holiday and the Federal Reserve blackout period. In addition, stronger crude oil prices, Canada’s key export, the recent China–Canada trade deal, and optimism ahead of today’s Canada inflation data add further pressure on USDCAD.
Rising geopolitical risks and a softer U.S. Dollar have lifted gold and silver to fresh record highs early Monday, even as momentum remains muted during the U.S. holiday. Crude oil prices are also supported by tensions surrounding Iran and ongoing supply concerns, while easing fears of a surge in Venezuelan output limit extreme price swings. Additionally, the distance to a Ukraine-Russia peace deal continues to keep risk premiums elevated, reinforcing strength in both precious metals and energy markets.
Sour sentiment weighs on the risk assets like cryptocurrencies and equities, ignoring the softer U.S. Dollar. With this, the Bitcoin (BTC) and the Ethereum (ETH) prices face downside pressure after a positive week, down for the fifth and second consecutive day in that order. Meanwhile, the Asia-Pacific shares edged lower, tracing Friday’s downbeat performance of the U.S. equities.
The week ahead is shortened but packed, with major economic releases and a possible U.S. Supreme Court decision on tariffs, with Tuesday flagged as decision day.
That said, inflation data from the European Union (EU) and Canada, along with the UK GDP, could attract momentum traders even during the U.S. holiday. Headlines around President Donald Trump’s tariff threats, tensions involving Iran and Venezuela, and the Ukraine–Russia situation will also be closely watched.
Despite the U.S. Dollar’s (USD) recent pullback, strong U.S. data and a neutral tone from Federal Open Market Committee (FOMC) officials could allow the USD to edge higher, challenging buyers of major currencies and crude oil. Equities may continue to drift, while cryptocurrencies could extend their recent weakness amid sour sentiment, even with U.S. markets closed for the holiday. Notably, having assets like Gold, Silver, and the Japanese Yen (JPY) could witness further gains.
May the trading luck be with you!
