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Global markets were rattled on Tuesday as renewed US threats over Greenland spilled into financial markets. Investors are unsettled by President Trump’s vow to press ahead with controversial tariff plans on European allies unless they acquiesce to US demands, reviving fears of a broader trade conflict. The mood has swung sharply from optimism to caution.
Wall Street felt it most. The S&P 500 endured its steepest drop since last October, wiping out early-year gains and dragging major benchmarks lower. Technology and growth names led the sell-off, underscoring how quickly risk appetite can ebb when geopolitical risk spikes.
Sterling is being affected by this morning’s news that headline inflation increased to 3.4% in December, marking the first time consumer prices have increased in five months. That information comes after a jobs update yesterday showed falling employee wages and reduced headcount in the private sector.
The US dollar also weakened as traders sought cover in safer assets. A softer dollar reflects the pullback from risk assets and growing unease about where the next escalation could come from.
Gold and other havens advanced as investors adjusted positions. That flight to safety has been a defining feature of recent sessions, with gold hitting fresh price highs and government bonds drawing demand even as yields remain historically elevated.
European markets slid too, with German, French and UK benchmarks under pressure alongside their US counterparts. The tightening in equity markets comes as global leaders deliberate at Davos, where trade and defence issues are high on the agenda.
Analysts say the risk now is that markets remain sensitive to political developments rather than pure economic data. With tariff deadlines looming and legal challenges to executive power unresolved, volatility could persist through the week.
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GBP: Sterling steadies as dollar weakens on risk wobble
Sterling held up reasonably well against its major peers as the dollar softened amid risk-off trading. UK data this week was mixed, but the broader market move has been driven by demand for alternatives to the US currency rather than fresh UK fundamentals. A steadier UK outlook has helped to cushion sterling’s mood even as global jitters linger.
GBP/USD: the past year
EUR: Euro slips with broader market unease
The euro has softened alongside other risk assets as tariff threats and geopolitical uncertainty weigh on sentiment. European stock markets were lower in sympathy with US declines, and that risk-off tone has put mild downward pressure on the single currency. ECB watchers will be watching for any spill-over into core inflation expectations.
GBP/EUR: the past year
USD: Dollar retreats as investors shun risk
The US dollar has retreated from recent strength, with traders moving toward safe havens like gold and government debt. The slide comes as the S&P 500 posted significant losses and risk appetite dipped sharply. With markets focused on geopolitics and trade uncertainty, the dollar’s role as a safe haven has been tested and found wanting in this bout of volatility.
EUR/USD: the past year
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