Dollar and Equities Remain on the Defensive; Greenland Dispute Center Stage at Davos
January 21, 2026
President Trump has arrived in Davos. For a forum whose chosen annual theme is “A Spirit of Dialogue,” it is both ironic and undoubtedly purposeful that the U.S. president chose this moment to issue ultimatums on the non-negotiability of transferring Greenland’s sovereignty from Denmark to the United States. There will be many meetings today between Trump and European leaders with no workable compromise thus far in sight. Headlines to emerge earlier today include ECB President Lagarde downplaying the impact on inflation within the euro area of Trump’s latest tariff threat; EU President Von der Leyen said Europe mustn’t bend to the law of the strongest; Swiss National Bank Schlegel’s acknowledgement that upward pressure on the franc from geopolitical tensions could depress Swiss inflation below zero percent again for a while; and U.S. Treasury Secretary Bessent disparaging the relevance of Denmark’s sales of Treasury assets in response to Trump’s poaching threat on Greenland.
In overnight financial market action, the dollar fell 1.0% against the South Korean won, 0.6% relative to the Mexican peso, 0.5% vis-a-vis the kiwi, 0.4% versus the Australian dollar, 0.2% relative to the Canadian dollar and Japanese yen and 0.1% against the euro, Swiss franc and sterling. Equity markets closed down 1.6% in Taiwan, -1.4% in Indonesia, and 0.4% in Japan and Australia. Share prices are down about 1% in Germany, Italy and Spain, and U.S. futures have slipped, but by a lesser extent. The Japanese JGB yield fell back eight basis points, while ten-year sovereign debt yields in the four largest Euroland economies have risen 1-2 basis points. Gold rose around 2% further, and silver, which famously spiked to $50.36 per ounce in 1980 when the Hunt Brothers attempted to corner that market, is now not far from $100. WTI oil edged above $60 per barrel.
Bank Indonesia’s first scheduled monetary policy review of 2026 left the key interest rate unchanged at 4.75%. That’s been the level since the last of six 25-basis point cuts between September 2024 and September 2025. Although Indonesian total and core CPI inflation of 2.9% and 2.4% respectively are close to the target mid-point, a recent spate of rupiah depreciation has injected a note of caution into willingness of monetary officials to extend the easing cycle at this time.
British consumer price inflation accelerated 0.2 percentage points to a 2-month high of 3.4% last month, which exceeded the consensus of forecasters to a marginal extent. Food and service cost inflation both moved higher. At 3.4%, inflation was twice the low point touched in 2024. Core CPI, however, matched November’s 11-month low. Retail price inflation of 4.2% was also at a 2-month high, but overall producer output inflation matched November’s 3-month low of 3.4% and decelerated among core items to a 6-month low of 3.2%. Producer input price inflation was at only 0.8% for the third time in four months.
Lebanese consumer price inflation printed at 12.2% in December, down from 14.7% in November, 18.1% at the end of 2024, 192% at the end of 2023, and the peak of 269% set in April 2023.
South African CPI inflation last month returned to October’s 13-month high of 3.6% from 3.5% in November. Retail sales in South Africa increased 0.6% in November and recorded their greatest 12-month rate of increase since July.
Canadian producer prices unexpectedly sank 0.6% in December, reversing two thirds of November’s increase, and lowering the 12-month rate of increase to a 4-month low of 4.9% from the prior month’s reading of 6.1%.
The orders sub-index of the CBI monthly survey of British industrial trends with a reading of -30 this January was its least negative since -27 in September.
U.S. mortgage applications jumped 14.1% last week on top of a 28.5% leap in the previous week. That two-week advance was the most over two successive weeks in over a year. Figures for U.S. pending home sales and construction spending will be released later this morning.
Copyright 2026, Larry Greenberg. All rights reserved.
Tags: Bank Indonesia, British CPI and Canadian PPI, Davos World Economic Forum
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