The U.S. dollar maintained its overnight gains against major currencies on Thursday following President Donald Trump’s decision to retract a threat of tariffs on several European NATO countries, highlighting the framework of an agreement with NATO regarding control of Greenland. The safe-harbour Swiss franc faced pressure, declining significantly from a three-week high, as gold also fell from its all-time peak. The Australian dollar reached a 15-month high, supported by enhanced risk sentiment and data indicating an unforeseen drop in the unemployment rate. The yen continued to face downward pressure, trading near a historic low against the euro, following the announcement by the Japanese Prime Minister this week regarding a snap election and a commitment to implement measures aimed at easing fiscal policy. The Bank of Japan is set to begin a two-day policy meeting on Thursday, with market participants anticipating no alterations, following the central bank’s decision to increase its policy interest rate at the last meeting held last month. The U.S. dollar remained stable at $1.1685 per euro on Thursday, after experiencing a 0.3% recovery in the previous session. The value remained steady at 0.7953 Swiss franc following a 0.7% increase overnight.

Trump’s announcement regarding potential tariffs on allied nations resisting his plans for Greenland caused market jitters and led to a widespread decline in U.S. assets. However, his statement in Davos on Wednesday, indicating that military action was off the table, provided some reassurance. On Saturday, Trump announced plans to implement tariffs starting February 1 on European Union countries including Denmark, Sweden, France, Germany, the Netherlands, and Finland, as well as Britain and Norway. This move is contingent upon these nations ceasing their resistance to U.S. efforts to gain control of Greenland, a statement that has been criticized by significant EU members as a form of blackmail.

The U.S. president announced that a framework for a deal with NATO regarding Greenland has been established, yet he refrained from providing specific details in a post on his Truth Social platform about the implications of this agreement. Consequently, he indicated that he would refrain from implementing tariffs.Market participants have swiftly adjusted to notable reversals, reducing their recently established bearish positions and long volatility hedges, partially covering USD shorts, and adopting a more balanced stance in gold and silver,” stated Chris Weston.The market has significantly diminished the potential risk of a U.S. confrontation with its NATO allies, as evidenced by Trump’s speech in Davos and his social media posts.
The Australian dollar, sensitive to market risks, increased by 0.4% to $0.6791, reaching a level not observed since October 2024. The value reached its peak since July 2024, standing at 107.52 yen.

In December, Australian data revealed a decline in the unemployment rate to a seven-month low, driven by a significant increase in employment that exceeded economists’ expectations by more than double. Analysts indicated that this could be pivotal in shaping the Reserve Bank of Australia’s policy decisions on February 3.According to Tony Sycamore, the jobs report released today has significantly heightened the likelihood of an RBA rate increase. The December report, despite the inherent volatility and noise in monthly labour force data, supports the RBA’s view that labour market conditions continue to be tight. The yen remained stable against most major currencies during Asian trading on Thursday, holding at 184.83 per euro, close to the record low of 185.56 reached last week. The Japanese currency was exchanged at 158.31 per U.S. dollar, close to last week’s 18-month low of 159.45.