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Markets retrace as geopolitical risks recede

Good morning. Price action is slowing across the financial markets as geopolitical noise levels come down, and consolidative trading patterns are emerging across most major currency pairs as investor focus pivots back toward economic fundamentals. The dollar is holding steady but remains on the defensive against an improving global growth backdrop, renewed talk of diversification away from US assets, and rising concern over fiscal trajectories. High-beta currencies such as the Australian dollar and Mexican peso have lost some momentum but are holding year-to-date gains, while demand for traditional havens is softening. Equity futures point to further gains, and Treasury yields...

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Relief rally supports additional market gains

Markets look set to extend gains for a second day after President Donald Trump ruled out the use of force and retreated from threats to seize Greenland through economic coercion. The dollar is firmer, yields are steadier, and stock futures are pointing to a stronger open as a relief rally plays out across asset classes. Measures of implied volatility in Treasury, equity, and foreign exchange markets are all coming down as investors reduce protection against tail exposures, and risk-sensitive currencies like the Australian and Canadian dollars are outperforming their safe-haven brethren. Late yesterday, Trump said he would not proceed with...

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Let’s make a deal

• Improved tone. Reports of a Greenland deal ‘framework’ boosts sentiment. US equities rose. USD index a bit firmer. AUD outperforms. NZD edges higher.• Data flow. The volatile Australian jobs report due today. US PCE deflator out tonight. Tomorrow Q4 NZ CPI is released. BoJ also meets on Friday. Global Trends An improvement in risk sentiment overnight after US President Trump dialed down his aggression with regards to Greenland at the Davos World Economic Forum. After earlier stating the US wouldn’t use force to acquire Greenland, President Trump posted that following discussions with the Secretary General of NATO a “framework...

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Selloff loses steam, traders remain on tenterhooks

After several days of turbulence, selling pressure is easing across financial markets, suggesting that investors expect US president Donald Trump to adopt a less confrontational approach when meeting in person with his counterparts at the World Economic Forum in Davos later today. The dollar is steadying against its peers, Treasury yields are stabilising near recent highs, and equity futures are pointing to a modest advance when North American markets open. Scarring will remain. For the second time in a year, markets have warned that the consequences of the president’s actions could weigh most heavily on the United States itself, not...

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‘Sell America’ trade intensifies

Equity futures, Treasuries, and the dollar are down for a second day as investors shun US assets in the aftermath of the weekend’s Greenland-related tariff threats from Donald Trump, and selling in Japanese bond markets puts upward pressure on global yields. On Saturday, Trump threatened to impose import taxes on goods from European countries until they allow the US to buy the Danish territory, beginning with a 10-percent levy on February 1 and increasing to 25-percent on June 1. He then sent a message to Norway’s Prime Minister saying that he no longer feels obliged to “think purely of Peace”...

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