The US dollar edged slightly lower on Thursday ahead of key economic data releases, as so-called “Sell America” trades faded after US President Donald Trump rolled back tariff threats and ruled out using force to take control of Greenland.

The dollar had recovered against the euro on Wednesday following Trump’s remarks, after losing just under 1% between Monday and Tuesday.

Elsewhere, the Australian dollar climbed to a 15-month high, supported by data showing an unexpected decline in the unemployment rate. The Japanese yen, meanwhile, remained under pressure after Prime Minister Sanae Takaichi this week called for early elections and pledged measures to ease fiscal policy.

Trump’s earlier threats to impose tariffs on allied countries opposing his ambitions over Greenland had rattled markets and triggered a broad sell-off in US assets. However, some analysts said there was limited evidence of a genuine shift away from the US dollar.

Bob Savage, chief market strategist at BNY, said: “This whole debate about European investors selling US assets is hard to support.”

He added: “This is not a Sell America story. It’s a risk-management story. What we’re seeing is an increase in hedging activity after volatility picked up, following extremely low levels at the end of last year.”

US data back in focus

Gold prices slipped slightly, while equity markets rebounded on Thursday. The dollar fell 0.10% to $1.1698 per euro, after rebounding 0.35% in the previous session. It also declined 0.25% to 0.7932 Swiss francs, after jumping 0.7% earlier.

Volkmar Baur, currency strategist at Commerzbank, said: “From a European perspective, it is still far too early to celebrate.”

He added that while details of the Greenland framework agreement remain unclear, “the most likely outcome is that the next bout of excitement will fade after a brief period of volatility, and the market will refocus on central banks and interest rate differentials.”

Economists are still working through distortions caused by last year’s US shutdowns. Greater clarity is expected later in the session with the release of personal consumption expenditures inflation estimates for October and November, the Federal Reserve’s preferred inflation gauge.

Australian dollar heads for fourth straight daily gain

The Australian dollar jumped as much as 0.6% to $0.6802, its strongest level since October 2024, and was on track for a fourth consecutive daily gain, outperforming even as risk assets came under pressure earlier in the week.

With the unemployment rate falling to a seven-month low in December and employment growth exceeding forecasts, markets now see the probability of an interest rate hike next month at more than 50%, up from 29% before the data.

Jane Foley, head of FX strategy at Rabobank, said: “The strength of both the Australian and New Zealand dollars is the latest example of how short-term interest rate speculation tied to central bank policy remains very much in play.”

The Australian dollar also rose as much as 1% to 108.03 yen, its highest level since July 2024.

By contrast, the Japanese yen slipped 0.2% to 158.68 per dollar, near an 18-month low of 159.45 reached last week.

Analysts expect the Bank of Japan to adopt a more hawkish tone at Friday’s policy meeting to help stabilise the yen, which is trading uncomfortably close to the 159–160 level widely seen as a potential trigger for official intervention.

Meanwhile, ultra-long Japanese government bonds extended gains on Thursday, amid expectations that the finance ministry may take steps to curb further rises in bond yields.

Gold prices fell broadly during Thursday’s trading, recording their first decline in four days and retreating from record highs, amid active correction and profit-taking, pressure from a firmer US dollar, and easing safe-haven demand as geopolitical tensions between the United States and Europe over Greenland subsided.

US President Donald Trump rolled back his threats to impose tariffs on European countries as leverage to take control of Greenland, ruled out the use of force, and hinted that an agreement to end the dispute over the Danish island could be close.

Price Overview

Gold prices today: Gold fell by about 2.25% to $4,722.48, from the opening level of $4,831.54, after recording an intraday high at $4,838.75.

At settlement on Wednesday, the precious metal rose by around 1.45%, marking a third consecutive daily gain, and hit a fresh all-time high at $4,888.41 per ounce, as investors flocked to safe-haven assets amid escalating global geopolitical tensions.

The US Dollar

The US dollar index rose by less than 0.1% on Thursday, extending its recovery for a second straight session from a two-week low, reflecting continued improvement in the dollar against a basket of major and secondary currencies.

This rebound comes alongside a pullback in the sell-off of US assets and an improvement in global risk sentiment, following President Donald Trump’s latest remarks at the World Economic Forum in Davos.

Greenland Developments

Trump withdrew his threat to impose tariffs on several European NATO members, announcing a framework agreement with NATO regarding control over Greenland.

Trump said on Truth Social: “We have put in place a framework for a future agreement on Greenland, and we will not impose the tariffs that were scheduled to take effect on February 1.”

US Interest Rates

US Supreme Court justices expressed skepticism over Trump’s unprecedented attempt to remove Federal Reserve Governor Lisa Cook, in a case that threatens the central bank’s independence.

According to CME’s FedWatch tool, pricing for the probability of leaving US interest rates unchanged at the January 2026 meeting currently stands at 95%, while pricing for a 25-basis-point rate cut remains at 5%.

Investors are currently pricing in two US rate cuts over the coming year, while Federal Reserve projections point to a single 25-basis-point cut.

To reassess these expectations, investors are closely monitoring further US economic data. Later today, key releases are due on economic growth in the third quarter of last year, as well as personal consumption expenditures for October and November.

The Federal Reserve is widely expected to keep interest rates unchanged at its meeting scheduled for January 27–28, despite Trump’s calls for rate cuts.

Gold Outlook

ANZ commodity strategist Soni Kumari said the US president’s retreat from his earlier statements was one of the factors contributing to the easing of geopolitical tensions, which is why prices are retreating.

Kumari added that gold remains preferred due to support from central banks, as well as its more stable positioning compared with other precious metals that are exposed to industrial sector influences, amid ongoing geopolitical tensions.

Goldman Sachs on Thursday raised its forecast for gold prices in December 2026 to $5,400 per ounce, up from $4,900 previously.

SPDR Fund

Gold holdings at SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell by about 4.00 metric tons on Wednesday, marking a second consecutive daily decline, bringing total holdings down to 1,077.66 metric tons.

The euro fell in European trading on Thursday against a basket of global currencies, extending its losses for a second consecutive day against the US dollar and moving away from a three-week high, amid continued correction and profit-taking. The single currency also came under pressure as concerns surrounding Greenland eased, particularly after US President Donald Trump softened his previously hardline stance on taking control of the island.

With inflationary pressures easing for policymakers at the European Central Bank, expectations have revived for at least one European interest rate cut this year. Markets are now awaiting further economic data from the euro zone to reprice these expectations.

Price overview

• Euro exchange rate today: The euro slipped about 0.1% against the dollar to 1.1670, from an opening level of 1.1681, after touching an intraday high of 1.1694.

• The euro ended Wednesday’s session down 0.35% against the dollar, marking its first loss in three days, after hitting a three-week high of 1.1768 in the previous session.

• Beyond profit-taking, the euro weakened following comments by US President Donald Trump regarding Greenland.

The US dollar

The dollar index edged up by less than 0.1% on Thursday, extending its recovery for a second straight session from a two-week low, reflecting a continued rebound in the US currency against a basket of major and secondary currencies.

Trump withdrew his threat to impose tariffs on several European NATO members, announcing a framework agreement with NATO regarding control of Greenland.

Trump said on his Truth Social platform that an outline for a future agreement on Greenland had been established, adding that the tariffs scheduled to take effect on February 1 would not be imposed.

Later today, the United States is due to release several key economic reports, including data on economic growth in the third quarter of last year and personal consumption expenditures for October and November.

These releases are expected to provide additional and strong signals on the future path of monetary policy at the Federal Reserve and the direction of US interest rates over the course of this year.

European interest rates

• Recently released data in Europe showed a slowdown in headline inflation in December, highlighting easing inflationary pressure on the European Central Bank.

• Following these figures, money markets raised pricing for a 25-basis-point European rate cut in February from 10% to 25%.

• Traders revised expectations from interest rates remaining unchanged throughout the year to at least one 25-basis-point cut.

• To further reprice these expectations, investors are awaiting additional euro zone data on inflation, unemployment, and wages.

Views and analysis

Chris Weston, head of research at Pepperstone, said traders moved quickly to respond to strong market reversals, trimming recently established bearish positions, reducing long hedges against volatility, partially covering dollar short positions, and maintaining a more balanced exposure to gold and silver.

Weston added that between Trump’s speech in Davos and his social media posts, markets have largely removed the risk of a US confrontation with its NATO partners.

The Australian dollar rose broadly in Asian trading on Thursday against a basket of global currencies, extending its gains for a fourth consecutive day against the US dollar and reaching its highest level in 15 months, supported by the release of strong Australian labor market data.

The data point to increasingly tight conditions in Australia’s labor market, adding further inflationary pressure on policymakers at the Reserve Bank of Australia. This has led to a sharp decline in the probability of an Australian interest rate cut in February and strengthened expectations that the central bank could move toward tighter monetary policy earlier than previously anticipated.

Price overview

• Australian dollar today: The Australian dollar rose 0.75% against its US counterpart to 0.6811, its highest level since October 2024, from an opening level of 0.6761. It recorded a session low at 0.6754.

• The Australian dollar ended Tuesday’s session up around 0.4% against the US dollar, marking a third consecutive daily gain, amid a rebound in US equities on Wall Street and easing concerns over escalating geopolitical tensions related to Greenland.

Australian labor market

Figures released by the Australian Bureau of Statistics on Thursday showed net employment surged by 65.2 thousand in December, the fastest pace since April 2025, far exceeding market expectations for an increase of 28.3 thousand. November employment was revised lower, from a loss of 21.3 thousand to a loss of 28.7 thousand.

The official data also showed the unemployment rate fell to 4.1%, its lowest level since May 2025, compared with market expectations of 4.4%, after registering 4.3% in November.

The above data indicate that tight conditions in the Australian labor market continue to intensify, underscoring the need for the Reserve Bank of Australia to maintain restrictive monetary policy for as long as possible in 2026.

Australian interest rates

• Following the data, market pricing for a 25-basis-point interest rate cut by the Reserve Bank of Australia in February dropped sharply from 33% to 5%.

• To reassess these expectations, investors are awaiting further data on inflation and wage growth in Australia.

Views and analysis

Tony Sycamore, market analyst at IG, said the strong jobs report significantly increased the likelihood of an interest rate hike by the Reserve Bank of Australia.

Sycamore added that while monthly labor force data can be volatile and subject to noise, the December report aligns with the Reserve Bank of Australia’s assessment that labor market conditions remain strong.