Euro Rises, Dollar Falls: The Greenland Effect
The US dollar weakened on Thursday (January 22nd), while more risk-sensitive currencies like the euro and the pound strengthened. Markets began to calm down after President Donald Trump withdrew his tariff threat and asserted he would not seize Greenland by military force—allowing the initial wave of panic from earlier in the week to subside.
In the forex market, EUR/USD rose to $1.1744 (dollar down 0.49%), after a brief rebound the previous day. Meanwhile, the dollar also weakened against the Swiss franc—USD/CHF fell to 0.7899 (dollar down 0.69%), indicating a shift in interest toward defensive assets as geopolitical tensions eased.
Data-wise, the PCE release (the Fed's favorite inflation indicator) showed that US consumption remained strong. Consumer spending rose 0.5% in November, the same as in October. Since household spending accounts for the largest portion of the US economy, this data reinforces the narrative that the economy remains resilient—and has the market reconsidering the Fed's future interest rate direction.
In Asia-Pacific, the Australian dollar (AUD) performed the most. AUD/USD rose to $0.684 (up around 1.15%) and hit its strongest level since October 2024, after labor data showed an unexpected decline in the unemployment rate. The market believes this could narrow the room for policy easing—meaning the possibility of a tighter RBA policy.
Conversely, the Japanese yen remains under pressure. USD/JPY is at 158.42, not far from last week's low of around 159.45. Yen sentiment is weighed down by domestic political factors—planned snap elections—and fiscal concerns, which make the market increasingly sensitive to the direction of Japanese bond yields.
Super-long-dated Japanese government bonds are also still in the spotlight. Bond price increases (yield declines) continue on speculation that the government could take steps to curb further yield spikes. Market focus now turns to Friday's Bank of Japan policy meeting, as a more hawkish signal is seen as crucial to helping stabilize the yen, which is nearing the 159-160 "intervention zone."
Source: Newsmaker.id
