Fra Danske Bank:
Sofie Grundvad Pedersen, [email protected] , Assistant Analyst
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The main event will be tonight’s FOMC meeting. We expect no monetary policy changes, in line with broad consensus and market pricing. As the Fed will not be releasing updated economic projections, attention will centre on Powell’s assessment of recent economic data, and the likelihood of further rate cuts this spring. We expect Powell to avoid any specific speculation regarding future Fed nominations and recent challenges to the central bank’s independence. Read more in: Fed preview – Temporary pause on rate cuts , 23 January.
The Bank of Canada also meet today, and we expect the central bank to maintain its policy rate at 2.25%.
Economic calendar
In the US, the consumer confidence index for January unexpectedly fell to 84.5 (cons: 90.9, prior: 94.2), diverging sharply from the University of Michigan’s survey, which had painted a more optimistic picture. The decline was most pronounced in the ‘present situation’ assessment, with labour market indicators showing weakness. The widely followed ‘jobs plentiful’ index dropped to its lowest level since February 2021, a time when the unemployment rate stood at 6.2%. This appears more tied to real economic conditions than tariff concerns, as inflation expectations eased. These sentiment indicators have sent somewhat conflicting signals lately, but all else equal, this could fuel some further USD weakness.
The EU and India have concluded a landmark trade agreement that will remove tariffs on over 90% of goods traded between the two economies. Under the deal, India will lower tariffs on European automobiles and agricultural products, while the EU will reciprocate by easing duties on India’s labour-intensive exports, which have suffered significantly due to the 50% tariffs imposed by the US. Currently ranked as the EU’s ninth-largest trading partner, India accounted for 2.4% of the bloc’s total goods trade in 2024 . The EU anticipates that the agreement will double its exports to India by 2032, fostering stronger economic ties.
In Hungary , the central bank kept policy rate unchanged at 6.50%, in line with market expectations.
Equities : Equities generally higher, with the same dynamics observed over the last three trading sessions: US tech and related utilities orchestrated a comeback, while small caps underperformed for a third session. Semis were particularly strong, likely speculation of hiked AI capex plans from the hyperscalers. Microsoft is important, reporting today after US closing.
European and Nordic equities also somewhat higher, but below the highs taken prior to the tariff threats. The rapid dollar decline probably plays a role behind the sluggish rebound, as the FX headwind hits earnings. Be aware that earnings revisions will be negative for most Nordic companies after post results, solemnly due to FX, although demand assumption is held constant, or even lifted. Another reason is that there were no contrarian dip to buy in the first place. Despite last week’s selloff we did not observe any genuine market stress and positioning were far from oversold. Investors are buying equities, but anchored in fundamental economic strength, which is a slower process higher than a dip buying opportunity.
FI and FX: Broad USD remains under heavy pressure as the prospect of joint FX intervention between the US and Japan added further momentum to the recent USD sell-off. EUR/USD finds itself flirting with the 1.20 mark, whereas EUR/CHF broke below the 0.92 mark, as the CHF has benefitted from the increased uncertainty and as an alternative to the USD. Scandies continue to do well, just as anything with a reverse correlation to USD, and EUR/SEK and EUR/NOK both saw Monday’s bounce completely reversed yesterday, with the latter once again breaking below 10.60.
See also our in-depth FI and FX morning comment *
Reading the Markets USD – Political uncertainty set to weigh on USD in 2026 , 27 January
Bank of England Preview – More disinflation needed for divided MPC to cut again , 26 January
Fed preview – Temporary pause on rate cuts , 23 January
Weekly Focus – A week of politics moving markets , 23 January
Reading the Markets Sweden , 23 January
Reading the Markets Denmark – Strong start for the new 2Y DGB despite volatile markets, 22 January
Report completed: 28 January 2026, 07:00 CEST
Report first disseminated: 28 January 2026, 07:30 CEST
Disclosures/disclaimer
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