Europe Summary and Highlights 27 January
The USD fell sharply against the JPY and CHF and more modestly against the EUR through the European morning.
European morning session
The USD fell sharply against the JPY and CHF and more modestly against the EUR through the European morning. USD declines were a consequence of lower US yields which were themselves a result of a general risk sell off. S&P 500 futures were down more than 1% on the morning following similar losses in Asia, and this lead to declines of around 10bps in US yields along the curve. European equities and yields were also lower, but less so than their US counterparts. The declines in equities were attributed to concerns about the Chinese AI start-up DeepSeek undermining the profitability of the AI sector, and most of the weakness in equities was in the tech sector.
USD/JPY fell 2 figures on the morning to 154, while USD/CHF fell almost a figure to 0.8980. EUR/USD gains were more modest, up around half a figure to 1.0510. GBP kept pace with the EUR, with EUR/GBP steady near 0.8410, having fallen back late on Friday. AUD/USD gained around 15 pips to 0.63 on the morning, but this only reversed losses seen in Asia.
Datawise, the German IFO survey showed a modest improvement, supporting the impression from the better preliminary S&P PMI data released last week, although the IFO business climate index rise was small, and the expectations index was unchanged.
Asia session
The tariff man strikes and have drawn first blood on Colombia. Over the weekend, Trump has announced tariffs and sanctions against Colombia. Tariffs on Colombian starts at 25%, to be increased to 50% in a week, citing Columbia's refusal to accept military deportation flight. Colombian president orders increase of import tariffs on US goods as retaliation. However, the White House soon says Colombia has agreed to accept illegal migrants returned from the US and is withholding all tariff. But risk continues to slump and sees USD/JPY trading 0.06% higher at 156.04 after gap lower at 155.67 from 155.94 Friday close.
Market participants reignited their fear against more tariff from Trump as he slapped it against Colombia. U.S. major equity indexes are slammed lower and continue to dive deeper as more Asian market online. Another story brewing about a Chinese AI startup, Deepseek, which trained their language model with more basic GPU, is able to compete with large language models introduced in the U.S.. It seems to be further weighing on U.S. equities, especially Nvidia. AUD/USD is down 0.43% to 0.6286 despite regional sentiment positive as USD strengthens, NZD/USD is also down 0.44% to 0.5684 while USD/CAD rose 0.32% with oil down more than half a dollar. Else, EUR/USD and GBP/USD are down 0.32%.