The US dollar fell against most major currencies during Tuesday’s trading, while sterling headed for its biggest two-day rise since December, supported by a broad rally as investors pared exposure to the US currency amid escalating trade tensions between the United States and Europe over Greenland.

US President Donald Trump has threatened to impose tariffs starting February 1 on imports from the United Kingdom, Denmark, Norway, Finland, France, Germany, and the Netherlands, unless these countries agree to transfer ownership of Greenland — the autonomous Danish territory — to the United States.

Investors responded by selling US assets, including the dollar, while rotating heavily into European currencies and gold.

Sterling has risen 0.8% over the past two days to trade near $1.348, although it underperformed the euro, which emerged as the biggest beneficiary of the dollar selloff. The euro was last up 0.4% on Tuesday — its largest daily gain since early November — trading at 87.03 pence against the pound.

UK labour market data released earlier in the day initially painted a relatively bleak picture of employment conditions. The unemployment rate held near its highest level in almost five years in November, while payroll employment fell at its fastest pace since November 2020.

However, analysts noted that the report also contained some more encouraging signals, suggesting that the worst of the slowdown may now be behind the economy.

George Buckley, chief UK and euro area economist at Nomura, said the data showed a decline in layoffs, alongside stable job vacancies and an unchanged unemployment rate. He also pointed to a fall in labour market inactivity. Wage growth — a key indicator closely watched by the Bank of England — slowed to levels he described as “consistent with the inflation target.”

Buckley added: “This provides a supportive backdrop for the bank to deliver another rate cut — and we expect a final move to 3.50% in April, with markets pricing the risk of an earlier cut or a larger number of reductions.”

Markets are currently pricing in one interest rate cut by the Bank of England by mid-year, with around a 60% probability of a second cut being delivered by December.

Silver prices rose in European markets on Tuesday, extending gains for a second consecutive session and continuing to shatter record levels, after breaking above the $95-per-ounce mark for the first time ever. The rally was driven by strong demand from retail investors, alongside support from the ongoing decline in the US dollar against a basket of currencies.

Renewed threats by US President Donald Trump to impose additional tariffs on European allies have weighed on global market sentiment, triggering a strong shift toward safe-haven assets.

Price Overview

• Silver prices today: Silver prices climbed 1.25% to $95.51, the highest level on record, from the session opening at $94.34. Prices touched a session low of $92.61.

• At Monday’s settlement, silver prices surged by 4.65%, marking the first gain in three sessions, supported by strong safe-haven demand for precious metals.

The US dollar

The dollar index fell by 0.6% on Tuesday, deepening losses for a second straight session and hitting a two-week low at 98.44 points, reflecting continued weakness in the US currency against a basket of major and secondary currencies.

Trump’s renewed tariff threats against European allies have revived what is known as the “Sell America” trade, last seen after the so-called Liberation Day tariffs announced in April last year, when US stocks, Treasury bonds, and the dollar all declined.

Tony Sycamore, market analyst at IG in Sydney, said investors are shedding dollar-denominated assets due to a loss of confidence in the US administration and rising strains in international alliances following Trump’s latest threats.

Sycamore added that while there are hopes the US administration may soon soften these threats — as it has done with previous tariff announcements — securing control over Greenland remains a core national security objective for the current administration.

Trump’s tariff threats

Over the weekend, Trump said he would impose additional tariffs of 10% starting February 1 on imports from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland, and Britain, until the United States is allowed to purchase Greenland.

Major European Union countries on Sunday condemned the tariff threats over Greenland, describing them as blackmail, while France proposed responding with a set of unprecedented economic countermeasures.

EU diplomats said ambassadors reached a preliminary agreement on Sunday to intensify efforts aimed at deterring Trump from imposing tariffs on European allies.

US interest rates

• According to the CME FedWatch tool from the CME Group, pricing for the probability of keeping 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 interest rate cuts over the coming year, while Federal Reserve projections point to a single 25-basis-point cut.

• To reprice these expectations, investors are closely monitoring upcoming US economic data releases.

• The US Supreme Court is widely expected to review this week a case related to Trump’s attempt to dismiss Federal Reserve Board member Lisa Cook.

• 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 prices rose in European markets on Tuesday, extending gains for a second consecutive session and continuing to shatter record levels, after breaking above the $4,700-per-ounce threshold for the first time ever. The move was supported by the current pullback in the US dollar, which has been hit hard by President Donald Trump’s tariff threats.

With the first Federal Reserve policy meeting of 2026 approaching, investors are closely monitoring the release of further key US economic data in an effort to gather clearer signals on the path of US interest rates this year.

Price Overview

• Gold prices today: Gold prices climbed by about 1.0% to $4,717.12, marking a fresh all-time high, from the session opening level of $4,670.99, while recording a low at $4,659.65.

• At Monday’s settlement, the precious metal posted a gain of 1.6%, marking its first advance in three sessions, as investors turned to safe-haven assets amid escalating global geopolitical tensions.

The US Dollar

The dollar index fell by 0.2% on Tuesday, extending losses for a second consecutive session and touching a one-week low at 98.84 points, reflecting continued weakness in the US currency against a basket of major and secondary currencies.

Renewed threats by US President Donald Trump to impose tariffs on European allies revived the so-called “Sell America” trade that followed the Liberation Day tariff announcements in April last year, when US equities, Treasury bonds, and the dollar all declined.

Tony Sycamore, market analyst at IG in Sydney, said investors’ retreat from dollar-denominated assets reflects a loss of confidence in the US administration and growing strains in international alliances following Trump’s latest threats.

Sycamore added that while there are hopes the US administration may soon seek to de-escalate these threats, as it did with previous tariff announcements, securing control over Greenland remains a core national security objective for the current administration.

Trump’s Tariff Threats

Trump said over the weekend that he would impose additional tariffs of 10% starting February 1 on imports from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland, and Britain, until the United States is allowed to purchase Greenland.

Major European Union countries on Sunday condemned the tariff threats over Greenland, describing them as blackmail, while France proposed responding with a set of unprecedented economic countermeasures.

EU diplomats said the bloc’s ambassadors reached a preliminary agreement on Sunday to intensify efforts aimed at dissuading Trump from imposing tariffs on European allies.

US Interest Rates

• According to the CME FedWatch tool from CME Group, pricing for the probability of keeping 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 interest rate cuts over the coming year, while Federal Reserve projections point to a single 25-basis-point cut.

• To reprice these expectations, investors are closely tracking upcoming US economic data releases.

• The US Supreme Court is expected this week to consider a case related to Trump’s attempt to dismiss Federal Reserve Governor Lisa Cook.

• 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.

Outlook for Gold

Tim Waterer, Chief Market Analyst at KCM Trade, said Trump’s “disruptive” approach to international affairs and his push for lower interest rates are highly supportive of precious metals, as clearly reflected in the sharp rally in gold and silver prices.

Kelvin Wong, Asia-Pacific market analyst at OANDA, said the Federal Reserve is expected to continue its rate-cutting cycle in 2026 due to a slowing labour market and weakening consumer confidence. Wong expects the first rate cut to occur either in June or July.

SPDR Fund

Gold holdings at the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, were unchanged on Monday, leaving total holdings steady at 1,085.67 metric tons — the highest level since May 3, 2022.

Sterling rose in European trading on Tuesday against a basket of global currencies, extending its gains for a second consecutive session against the US dollar and hitting a one-week high, supported by continued weakness in the US currency following President Donald Trump’s threats over Greenland.

Investors are awaiting key UK labour market data later today, which is expected to provide clearer signals on the likelihood of an interest rate cut by the Bank of England when it holds its first meeting of the year in February.

Price overview

• Sterling today: The pound rose 0.2% against the dollar to $1.3450, the highest level in a week, from the session opening at $1.3426, while recording a low at $1.3410.

• On Monday, sterling gained about 0.35% against the dollar, marking its first gain in three sessions, after earlier touching a five-week low at $1.3344.

US dollar

The dollar index fell 0.2% on Tuesday, extending losses for a second straight session and hitting a one-week low at 98.84 points, reflecting continued weakness in the US currency against a basket of major and secondary currencies.

Renewed threats by US President Donald Trump to impose tariffs on European allies have revived the so-called “Sell America” trade seen after the Liberation Day tariff announcements in April last year, when US equities, Treasuries, and the dollar all declined.

Tony Sycamore, market analyst at IG in Sydney, said investors’ move away from dollar-denominated assets reflects a loss of confidence in the US administration and rising strains in international alliances following Trump’s latest threats.

Sycamore added that while there are hopes the US administration may soon move to de-escalate these threats, as it has done with previous tariff announcements, securing control over Greenland remains a core national security objective for the current administration.

UK interest rates

• Following the Bank of England’s meeting in December, traders scaled back bets on continued monetary easing and further interest rate cuts.

• Market pricing for a 25-basis-point rate cut by the Bank of England at its February meeting remains steady below 20%.

UK labour market

To reprice these expectations, investors are closely watching key UK labour market data due later today, including unemployment benefit claims for December, the unemployment rate, and average earnings figures for November.

Outlook for sterling

At Economies.com, we expect that if UK labour market data come in stronger than market expectations, the probability of a February rate cut by the Bank of England will decline, potentially driving further gains in sterling.