The US Dollar (USD) finished the week close to a four-month low around 97.80, reflecting a persistent weak tone amid heightened risk aversion in financial markets. Concerns intensified after President Donald Trump threatened to impose 10% tariffs on eight European nations, contingent upon Denmark’s agreement to sell Greenland to the US. Tensions escalated until Trump announced, along with NATO Secretary General Mark Rutte, a framework for a potential deal concerning Greenland on Wednesday.
In addition to geopolitical worries, the US released revised data regarding its Gross Domestic Product (GDP) for the third quarter, upwardly adjusting the annualized growth rate for the three months ending in September to 4.4%, an increase from the previous estimate of 4.3%. The country also unveiled the Personal Consumption Expenditures (PCE) Price Index data for October and November, showing that annual inflation rose to 2.8% in November, from 2.7% in October. The core PCE Price Index mirrored this trend, rising by 2.8% in November after a similar increase the previous month, aligning with market expectations.
The dollar index (DXY) hovered near the 97.80 low, reflecting a multi-week decline that followed lower-than-expected preliminary S&P Global Purchasing Managers Indexes (PMIs) for January. The Manufacturing PMI came in at 51.9 against expectations of 52.1, and the Services PMI showed 52.5 compared to a forecast of 52.8.
A detailed look at the currency movements shows the US Dollar’s performance against several major currencies. The table indicates a 0.43% decline against the Euro, a 0.87% drop against the British Pound, and a 1.53% fall against the Japanese Yen. Notably, the USD strengthened most against the Euro, illustrating pronounced fluctuations in the forex market.
In the Eurozone, preliminary estimations of the Hamburg Commercial Bank Purchasing Managers’ Indexes (PMIs) were mixed. The Manufacturing Index improved to 49.4, rising from 48.8 in December but still remaining in contraction territory. Meanwhile, the Services PMI decreased from 52.4 to 51.9. The Composite PMI held steady at 51.5, slightly below the anticipated 51.6 level. Focus now shifts to upcoming GDP and inflation data from the Eurozone and Germany.
The British Pound traded near the 1.3600 mark, a level it last reached in September 2025. UK Retail Sales rose by 0.4% month-over-month in December, exceeding expectations for a 0.1% decline, while year-on-year sales growth improved from 1.8% to 2.5%, surpassing forecasts of 1% growth. The S&P Global Services and Composite PMIs for January fared better, with the Services output increasing from 51.4 to 54.3 and the Manufacturing PMI rising from 50.6 to 51.6, pushing the Composite PMI from 51.4 to 53.9.
In the context of Japanese markets, the USD/JPY traded near a two-week low at 156.00 following the Bank of Japan’s decision to maintain its policy settings unchanged at 0.75%. BoJ Governor Kazuo Ueda did not comment on foreign exchange levels during the post-meeting press conference.
Australia’s currency, the AUD, hovered around 0.6880, achieving its highest level since September 2024, driven by record highs in gold prices amid ongoing geopolitical tensions, with gold currently valued at a record $4,988.
Looking ahead, the European Central Bank (ECB) is preparing for several key speeches, including ECB President Christine Lagarde and board member Joachim Nagel. The week also features significant monetary policy events across various central banks, including the Bank of Japan and the Federal Reserve. Markets will closely monitor upcoming data releases, including employment statistics, inflation measures, and GDP updates from Germany and the Eurozone.
As the landscape evolves, economic perspectives will be shaped further by the outcomes of these upcoming monetary policy meetings and economic indicators, which will undoubtedly resonate throughout the global financial markets in the coming days.
