FX Daily: JGB sell-off vies for attention with Greenland in Daily Currencies Ratings 20/01/2026 USD: Softer, but ‘weaponisation of capital’ risks look overblown The re-opening of US markets after yesterday’s public holiday has seen the dollar a little softer across the board. USD/JPY is the exception – see below. The S&P 500 looks set to reopen at around 1.5% lower than Friday’s close. This would nearly match the sell-off seen in European bourses yesterday. There has been no major news on Greenland overnight, which leaves the market to focus on US President Donald Trump’s Davos interviews and social media posts emerging tomorrow. Depending on how Davos discussions develop, we will then know whether EU leaders need to play hardball when they meet on Thursday, whether US tariffs on Europe go into effect on 1 February and whether Europe retaliates with a €93bn package of tariffs on 6-7 February. There was much discussion yesterday over the ‘weaponisation of capital’ – that Europe could retaliate against the US by pulling some of its $8-12tr of US investments. The discussion sees figures cited like the $27tr Net International Investment Position (NIIP) deficit run by the US after decades of twin deficits. The NIIP represents the stock of US liabilities against its foreign asset position. The latest US release on the NIIP is instructive. Of the $3.2tr increase in US liabilities in the third quarter of last year, around half of that was driven by the valuation effects of US assets. Those valuation effects are why the European buy-side is in US asset markets. And until the performance outlook for those assets significantly shifts, we are unlikely to see a significant exodus of European capital from the US. At the same time, we note the foreign official sector has been selling US Treasuries for a while now, but has been swamped by private sector demand. That said, we are a little negative on the dollar this year for macro reasons. But a 10% sell-off akin to last April’s ‘sell America’ theme looks unlikely. This is also because the foreign buy-side now has more appropriate FX hedge ratios on US assets than the very underhedged positions being run last April. Away from geopolitics, today’s data calendar in the US only sees the weekly ADP jobs numbers. These are expected at around 10-12k again and support the low-hiring, but not deteriorating, US jobs market. DXY looks as though it wants to explore the downside with risks down to 98.65. But USD/JPY going bid may prevent DXY looking too offered. Chris Turner EUR: Pressure to step up With the red lines of sovereignty being threatened, pressure is building for European political leaders to stand firm. FX markets seemed to like the speech from UK Prime Minister Keir Starmer yesterday that tariffs on allies were ‘completely wrong’. EUR/USD broke technical resistance at 1.1640/50 overnight and looks biased to the 1.1690/1700 area. But as above, we think we are far from an environment that would trigger a major dollar sell-off. And again, we re-emphasise that seasonal factors tend to be more dollar-supportive, especially in February. Our one-month forecast of 1.17 for EUR/USD presented in our latest FX Talking feels about right. In terms of eurozone data today, we will be interested in the German ZEW (expected to head toward one-year highs) and also the eurozone November current account data. This has been euro supportive – but we do acknowledge the recent rise in energy prices, particularly for natural