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.

The timeline of the conflict between the United States and Venezuela points to a long-term strategy centered on securing supplies of heavy crude for US Gulf Coast refineries. These refineries are configured to process high-sulfur heavy grades and benefit from Venezuela’s ability to deliver oil within short timeframes. Such a shift would reduce US dependence on high-sulfur fuel oil from the Middle East. Venezuelan oil exports are expected to gradually recover toward the United States, Europe, and India, putting China at a disadvantage, while the OPEC+ alliance remains on the defensive.

US Gulf Coast refineries process about 1.45 million barrels per day of imported crude out of total average throughput of around 9 million barrels per day. With a projected addition of 400,000 to 500,000 barrels per day of Venezuelan oil, particularly Merey crude, nearly 5% of West Texas Intermediate feedstock could be replaced with Venezuelan Merey. Linear programming models from AVEVA were applied to several Gulf Coast refineries equipped with coking, fluid catalytic cracking, and hydrocracking units to estimate changes in product yields and heavy-oil unit utilization rates. The results point to an average 2% increase in diesel output, driven mainly by higher bottom-of-the-barrel utilization, as heavy conversion unit run rates rise by about 2% to 3%.

Over the longer term, as Venezuelan crude production exceeds 900,000 barrels per day in 2025 and as US capital inflows and associated demand materialize, Rystad Energy expects Venezuela’s refining sector, which has nameplate capacity of 1.2 million barrels per day, to begin lifting utilization rates over an 18-to-24-month period. Current run rates are constrained by recurring power outages, unplanned shutdowns, and poor maintenance. We estimate that an effective utilization rate of around 60% could be achieved by mid-next year.

China remains the biggest loser in this shifting structure. Losing access to heavily discounted Venezuelan oil undermines the economics of independent “teapot” refineries and puts nearly $12 billion in oil-backed loans at risk. While some high-sulfur fuel oil and heavy crudes from the Middle East may be redirected toward Asia, Chinese refiners would face higher feedstock costs, longer shipping distances, and greater geopolitical risk compared with the Venezuelan crude they previously imported. By contrast, India emerges as a structural winner, given its complex refineries suited to processing high-sulfur heavy crudes and a renewed opportunity to absorb Venezuelan oil as sanctions ease.

Venezuelan oil has accounted for roughly 500,000 barrels per day of China’s total refinery throughput of about 15 million barrels per day since around 2019, the year when US opposition to Venezuela’s energy sector intensified. Chinese refineries that process heavy crudes are typically integrated facilities with advanced bottom-of-the-barrel units. As a result, the loss of Venezuelan heavy crude is unlikely to have a material impact on overall product yields in China, given total throughput of around 15 million barrels per day. While some individual refineries that relied on this crude will need to adjust their crude slates, these changes are not expected to materially affect China’s aggregate product yields.

Copper spreads in London retreated sharply after Tuesday’s surge, as analysts said fresh deliveries of the metal could soon enter exchange warehouses, easing supply constraints.

Contracts expiring tomorrow closed at a premium of $2 a tonne over those expiring a day later, after the closely watched daily spread briefly jumped to an unusually large $100-a-tonne premium on Tuesday and remained elevated through much of Wednesday morning.

Premiums on nearby contracts — known as backwardation — signal that demand for metal within the London Metal Exchange warehouse system exceeds available supply. However, the pullback in the so-called tom/next spread and the emergence of discounts further along the curve suggest the tightness may be short-lived.

Backwardation can inflict heavy losses on traders rolling short positions forward, while simultaneously creating incentives to deliver metal into the LME warehouse network. Exchange data show sizable privately held inventories that can be transferred relatively easily into warehouses in Asia, the United States and Europe.

Analysts said the unwinding of spreads points to such flows materialising. Copper inventories tracked by the London Metal Exchange rose 3.8% to 112,575 tonnes on Wednesday, marking a sixth consecutive daily increase.

Al Munro, head of base metals strategy at Marex, said by phone: “We’ve already seen some deliveries, and in reality there’s probably more stock that will be delivered to take advantage of the backwardation.” He added: “Some people think moving inventory between exchanges is straightforward, but it can be cumbersome, and short sellers sometimes face delays delivering metal against their positions.”

Disruptions in LME spreads have had little impact on outright copper prices. The three-month benchmark contract rose as much as 1.6% on Wednesday, approaching $13,000 a tonne, as global equity markets stabilised after Tuesday’s selloff. At the same time, Goldman Sachs said it expects copper flows into the United States to continue — a key driver behind the recent surge in prices.

The industrial metal has posted a string of record highs since late last year, amid mine supply disruptions and rising shipments to the United States ahead of potential tariffs, tightening availability elsewhere. Investors also see demand strengthening sharply as the fast-growing artificial intelligence sector expands.

Flows into the United States

A rare trading opportunity — shipping record volumes of copper to the United States — has fuelled price gains there. Although the latest rally on the LME has pushed nearby US contracts into discount, Goldman Sachs expects flows to persist, as arbitrage opportunities remain open further out on the curve.

“Our current view is that inventory build-ups will continue, even with today’s price differentials between COMEX and the LME,” analyst Eoin Dinsmore said during a briefing on Wednesday.

Goldman Sachs forecasts US copper inventories will rise by about 600,000 tonnes this year, including 200,000 tonnes in the first quarter. The pace is expected to slow in the second and third quarters before accelerating again toward year-end.

Other industrial metals also rallied alongside gold — which climbed to a fresh record — amid the Greenland crisis and turmoil in the Japanese government bond market, boosting demand for safe havens. Frenzied investment flows into several metals have underpinned gains in recent weeks, while so-called “debasement trades,” as investors move away from traditional financial assets, have provided further support.

Copper was last up 1.3% at $12,920 a tonne on the London Metal Exchange at 1:57 p.m. local time. Aluminium rose 0.6% to $3,126 a tonne, while tin surged as much as 6.9% to $52,810 a tonne.