Market Wrap 2026-01-26

Core-Brief

26 Jan 2026 — 12 min read

The Bank of Japan (BoJ) held its short-term interest rate at 0.75%, as anticipated, with an 8-1 vote; Takata voted in favor of a 25bp increase.
The BoJ Outlook Report adjusted its 2025 and 2026 GDP forecasts upward, while revising its 2027 forecast downward; the 2026 inflation forecast was revised upward to 1.9% (previously 1.8%).
USD/JPY experienced fluctuations following the announcement, rising during Governor Ueda's press conference before declining due to potential Ministry of Finance (MoF) activity.
European stock exchanges and US equity futures are trading lower; NQ -0.4%.
US Treasuries (USTs) and Bunds are nearly flat, Gilts initially led before reversing, and Japanese Government Bonds (JGBs) are lagging.
Commodities are awaiting the trilateral summit; XAU reached another all-time high (ATH) overnight but has since retreated from its peak.
Looking ahead, key events include Global Flash PMIs (January), Canadian Retail Sales (November), US UoM Consumer Expectations Final (January), and the trilateral meeting between the US, Ukraine, and Russia.

EUROPEAN TRADE

EQUITIES

European stock exchanges are generally trading lower, contrasting with the largely positive activity observed overnight.
Most European sectors are trading in negative territory. Leading sectors include Telecommunications (+1.1%), Energy (+1.2%), and Healthcare (+0.4%). The Telecommunications sector has been boosted by Ericsson (+8.3%) following the company's strong Q4 earnings, while higher crude prices have supported the Energy sector. Conversely, Construction (-0.9%), Travel (-1.0%), and Financial Services (-0.5%) are lagging, with no specific news driving the movement.
US equity futures are broadly lower, reflecting the subdued risk sentiment in Europe. Focus will be on US Flash PMIs, as well as the trilateral meeting between the US, Russia, and Ukraine.

FX

The Dollar Index (DXY) is slightly firmer this morning, trading within a 98.25-98.48 range, which is towards the lower end of the previous day's range. News flow for the index is limited this morning, with attention focused on the upcoming trilateral meeting between the US, Russia, and Ukraine; President Trump commented that "anytime we meet, it is good."
The Japanese Yen (JPY) is currently the top-performing G10 currency this morning. Earlier, the BoJ maintained steady rates (with dissent) and revised its 2026 inflation forecasts upward, initially boosting the JPY, but gains gradually faded into the Ueda meeting. The Governor avoided explicitly signaling a rate hike but noted concerns about a "rapid" rise in yields, also adding that they "must pay attention to even small FX moves" (strengthening JPY).
Subsequently, significant pressure was observed in USD/JPY soon after Governor Ueda concluded his press conference. Specifically, USD/JPY fell from 159.10 to 157.32 in an immediate reaction before gradually recovering to around the 158.00 level where it currently trades. Some speculated about intervention, although Bloomberg's Cudmore suggested the move was a rate check (i.e., the MoF contacting banks to gauge their views on the appropriate JPY level). In response, Finance Minister Katayama declined to comment on whether they had intervened in the FX market, instead reiterating that they are closely monitoring FX movements with a high sense of urgency.
G10 currencies are mixed against the Dollar. The British Pound (GBP) is among the top performers, supported by a stronger-than-expected Retail Sales report (which also included upward revisions to prior data); PMI figures also present a positive picture of activity in the region. Cable subsequently rose further to a session peak of 1.3532 after Bank of England (BoE) official Greene stated that "forward indicators for wage growth are even more concerning than inflation expectations," with other commentary generally striking a typically hawkish tone.
Elsewhere, the Euro (EUR) is mildly lower; it earlier slipped to session lows on weaker French PMI data (Services surprisingly contracted) but then rose on upbeat German figures.

FIXED INCOME

JGBs are currently lower by approximately 40 ticks, with a maximum downside of just under 50 ticks at a session low of 131.32. This action follows the BoJ and Governor Ueda's press conference, where the narrative suggests that April is the earliest possible time for a rate hike, as Governor Ueda specifically mentioned observing price behavior for that period as a "factor to mull a hike." However, JGBs remain notably above their week-to-date (WTD) trough of 130.66, and yields are off WTD highs. Nonetheless, the week's activity, driven by fiscal commentary and the BoJ, has triggered a modest shift in market pricing, with 21bps of tightening currently implied by June versus approximately 18bps last week; for April, it is currently 14bps versus 11bps last week.
USTs are a tick or two higher in a very narrow 111-19 to 112-23 range, awaiting the trilateral summit regarding Ukraine (timing to be confirmed), flash PMIs, and the potentially imminent Federal Reserve (Fed) Chair announcement.
Bunds, in contrast, are a tick or two lower but also within a narrow 127.64-84 range. There was modest two-way action but no significant movement following the January Flash PMIs, as political uncertainty regarding France and the latest geopolitical/tariff developments potentially render some of the responses redundant.
OATs are broadly in line with core benchmarks, trading towards the midpoint of the 121.10 to 121.27 range. Earlier, the French parliament expressed confidence in Prime Minister Lecornu (as expected), although he is still subject to another no-confidence motion. Consequently, the OAT-Bund 10-year yield spread has widened slightly to 63bps but remains within a comfortable and familiar range.
Gilts are outperforming, with gains of up to 32 ticks to a high of 91.68, currently holding around 10 ticks below that level. This upside occurs despite the strong December Retail Sales release and upward revisions to the November year-over-year (Y/Y) components. The data appears to have been overshadowed by a reassessment of political risk following Thursday's Burnham-induced sell-off, as more commentators are noting that Burnham's path to becoming a Member of Parliament (MP) is challenging and largely dependent on the pro-Starmer Labour National Executive Committee (NEC).
However, the move for Gilts unwound after strong UK PMIs and hawkish commentary from BoE's Greene, points that were enough to take the benchmark to near enough flat on the day.

COMMODITIES

In short, the commodity space is awaiting the trilateral summit between Ukraine, Russia, and the US today and potentially into tomorrow. Timing and details surrounding the meeting are currently limited, although the attendees are known. From Ukraine: Umerrov, Budanov, Arakhamia, and Hnatov. From Russia: Kostyukov; note that Dmitriev is also in the UAE, but it is unclear whether he will participate. From the US: Witkoff and Kushner.
Crude oil is firmer by just under USD 1 per barrel, trading towards highs of USD 60.22/bbl and USD 64.93/bbl for WTI and Brent, respectively. This upside is more of a consolidation from the downside seen on Thursday than a fundamentally driven move higher.
XAU (gold) pulled back in the early European morning. Interestingly, this move occurred alongside downside in US equity futures at the time. As such, the move is perhaps profit-taking from recent gains; similar action was also observed in silver at the time, although XAG (silver) remains firmer on the day. Spot gold briefly fell below USD 4.9k/oz after hitting USD 4967/oz overnight.
Base metals feature gains in 3M LME Copper. This upside seemingly occurred alongside strength in China overnight, with 3M LME reaching a high of USD 12.97k/T. Note that the Shanghai Futures Exchange will adjust price limits and margin ratios for nickel, aluminum, lead, zinc, and stainless-steel futures as of the 27th of January settlement.
China’s Shanghai Futures Exchange will adjust price limits and margin ratios for nickel, aluminium, lead, zinc, and stainless-steel futures following the 27th of January closing settlement.
China is reportedly set to offer CNY-denominated liquefied natural gas futures contracts as early as February, according to sources.
Goldman Sachs lowers its Summer'26 Henry Hub forecast to USD 3.75/MMBtu (previously USD 4.50/MMBtu) and maintains its 2027 forecast at USD 3.80/MMBtu.
US President Trump said Venezuelan oil will be divided up.

TRADE/TARIFFS

An EU official stated that India and the EU will announce a free trade agreement as soon as next week.
The same EU Official announced that the India-EU FTA will lead to substantially lower tariffs.
The Trump administration pushed out two key officials focused on countering technological threats from China, according to the WSJ, citing sources; this has raised concerns among US security hawks about the softer stance towards China.
Spanish PM Sanchez said the US is provoking tension in the Transatlantic, and the EU has the instruments to respond proportionally to coercion.
The EU is moving to revive its US trade deal after President Trump backed away from his tariff threat tied to Greenland.
US President Trump said the people who brought the tariff legislation against the US are strongly China-oriented; the US is going so well, with giant growth and investment and almost no inflation.

NOTABLE EUROPEAN HEADLINES

Germany's core budget had borrowing of EUR 66.9bln instead of the allocated EUR 81.8bln, according to sources. Sources also reported that total investment hits a record level of EUR 86.8bln in 2025.
The French parliament expressed confidence in Prime Minister Lecornu (i.e., the no-confidence motion failed); another motion is expected to follow shortly.

NOTABLE EUROPEAN DATA RECAP

UK S&P Global Composite PMI Flash (Jan) 53.9 vs. Exp. 51.5 (Prev. 51.4).
UK S&P Global Services PMI Flash (Jan) 54.3 vs. Exp. 51.7 (Prev. 51.4).
UK S&P Global Manufacturing PMI Flash (Jan) 51.6 vs. Exp. 50.6 (Prev. 50.6).
UK Retail Sales MoM (Dec) M/M 0.4% vs. Exp. -0.1% (Prev. -0.1%, Low. -0.7%, High. 0.5%).
UK Retail Sales ex Fuel YoY (Dec) Y/Y 3.1% vs. Exp. 1.4% (Prev. 2.6%, Rev. From 1.2%, Low. 0.8%, High. 2.2%).
UK Retail Sales YoY (Dec) Y/Y 2.5% vs. Exp. 1% (Prev. 1.8%, Rev. From 0.6%, Low. 0.4%, High. 1.7%).
UK Retail Sales ex Fuel MoM (Dec) M/M 0.3% vs. Exp. -0.2% (Prev. -0.4%, Rev. From -0.2%, Low. -0.8%, High. 0.5%).
UK Gfk Consumer Confidence (Jan) -16 vs. Exp. -16 (Prev. -17).
EU HCOB Services PMI Flash (Jan) 51.9 vs. Exp. 52.6 (Prev. 52.4).
EU HCOB Manufacturing PMI Flash (Jan) 49.4 vs. Exp. 49.1 (Prev. 48.8).
EU HCOB Composite PMI Flash (Jan) 51.5 vs. Exp. 51.8 (Prev. 51.5).
German HCOB Composite PMI Flash (Jan) 52.5 vs. Exp. 51.6 (Prev. 51.3).
German HCOB Services PMI Flash (Jan) 53.3 vs. Exp. 52.5 (Prev. 52.7).
German HCOB Manufacturing PMI Flash (Jan) 48.7 vs. Exp. 47.8 (Prev. 47.0).
French HCOB Composite PMI Flash (Jan) 48.6 vs. Exp. 50.1 (Prev. 50.0).
French HCOB Manufacturing PMI Flash (Jan) 51.0 vs. Exp. 50.3 (Prev. 50.7).
French HCOB Services PMI Flash (Jan) 47.9 vs. Exp. 50.5 (Prev. 50.1).

CENTRAL BANKS

BoJ

The BoJ maintained its short-term interest rate at 0.75%, as expected, with an 8-1 vote split; Takata voted for a 25bps hike.
BoJ Governor Ueda (post-policy press conference) stated that headline inflation is soon to undershoot 2%; it is not yet at the stage to consider whether the goal achievement is coming earlier. Monetary policy will be conducted in such a way as to ensure they do not fall behind the curve. Rates will continue to be raised if the economic outlook is realized. It will take a while before the full impact of tightening is seen across the economy, and conditions remain accommodative after the December move. Nimble market operations will be conducted to respond to irregular moves; there will be close collaboration with the government on long-term rates. Operations could be conducted to encourage stable yield formation. Attention must be paid to even small FX moves as underlying inflation approaches 2%.

Other

BoE's Greene said that due to spillovers, there can be a case for the BoE doing the opposite of the Fed in cases of divergence. Underlying employment growth remains a sideways trend, with vacancies appearing to have leveled out. There is no immediate evidence of a non-linear increase in unemployment. BoE survey data suggests that the decline in wage growth has now run its course. Forward indicators for wage growth are even more concerning than inflation expectations.
RBNZ Governor Breman reaffirmed the commitment to achieve the inflation mid-point, and core inflation remains within the target range.
US President Trump stated that mortgage rates hit a 3-year low despite "Too Late" Powell; the Fed has been discredited during Chair Powell's reign.
US President Trump, on the Fed Chair, said he is done with interviews and has someone in mind.

NOTABLE US HEADLINES

US President Trump thanked Chinese President Xi for working with the US and ultimately approving the TikTok deal, adding that Xi could have gone the other way.
The US House passed a package of FY26 funding bills in a major step towards averting a government shutdown on January 31st, sending it to the Senate for final votes.
The US Government funding package is poised for House approval as voting continues.
US House Speaker Johnson said there is no GOP consensus on whether to use tariff revenue to send USD 2k checks out.

GEOPOLITICS

RUSSIA-UKRAINE

Russia's Kremlin said discussions in Abu Dhabi will happen today and will continue tomorrow if necessary. Russia's sovereign assets frozen in the US amount to a little less than USD 5bln. They are not looking to go into details on the "Anchorage Formula" for a peace agreement with Ukraine.
Ukrainian President Zelensky said he discussed with US President Trump additional air defense missiles and provisions for PAC-3 & anti-ballistic missiles.
Ukraine President Zelensky said he is waiting for US President Trump, a date, and a place for the signing of security guarantees.
Russia's Kremlin said the Greenland proposal and Board of Peace were discussed with US envoys; talks were constructive. Without solving the territorial issue, there is no prospect of long-term settlement in Ukraine.
Russian envoy Dmitriev called the meeting between President Putin and US envoys important.
Russia's Kremlin said the talks between President Putin and US envoys have concluded.
US President Trump said Russian President Putin, alongside others, will have to make concessions to end the war in Ukraine. Putin and Zelensky want to make a deal. The Ukraine war doesn't affect the US; it affects Europe.
EU Commission President von der Leyen said Europe will continue to work on Arctic security, step up investments in Greenland and Arctic-ready equipment, and deepen cooperation with partners in the region. They are well-prepared with measures if tariffs are applied. Europe should use the defense spending 'surge' on Arctic-ready equipment. They are close to a prosperity deal with the US and Ukraine.
US President Trump said the US will work with NATO on Greenland security; there are good things for Europe within the framework. On the trilateral meeting with Ukraine and Russia, he said "anytime we meet, it is good." There will be something on Greenland in 2 weeks.
The Russian defence ministry reported strategic bomber patrols conducted over the Baltic Sea.

MIDDLE EAST

Israeli officials reportedly express concern that they could be targeted in retaliation by Iran in response to a US strike, according to the FT, citing sources.
US President Trump, on Iran, said they have a big force going towards Iran; they are watching Iran very closely and would rather not see something happen on Iran; they will be doing a 25% secondary tariff on Iran.

OTHERS

US President Trump posted that the Board of Peace withdraws its offer for Canada to join.
US President Trump posted "Maybe we should have put NATO to the test: Invoked Article 5, and forced NATO to come here and protect our Southern Border from further Invasions of Illegal Immigrants".
The US House narrowly rejected a resolution to limit President Trump's war powers in Venezuela.
US President Trump said Chinese President Xi will come to the US towards the end of the year.
NATO's Rutte and Denmark's PM are to meet on Friday morning.
The Russian defence ministry reported strategic bomber patrols conducted over the Baltic Sea.

CRYPTO

Bitcoin is slightly lower and trades just above the USD 89k mark, while Ethereum holds above USD 2.9k.

APAC TRADE

APAC stocks traded entirely in positive territory, although without a clear sector-led driver, as regional sentiment remained broadly constructive.
The ASX 200 posted modest gains, supported by strength in mining and metals as gold, silver, and platinum extended their bid. A strong PMI print—with both manufacturing and services pushing further into expansion—added to the positive tone.
The Nikkei 225 gapped higher at the open but later pared part of its advance, pressured by chip stocks after weak Intel earnings. Offsetting some of the drag, videogame names outperformed, with Nintendo (+5%) boosted by strong US Switch 2 sales data. Following the BoJ rate decision, the Nikkei was unreactive as rates remained unchanged.
The Hang Seng and Shanghai Comp opened higher, with the Hang Seng outperforming after Alibaba (+3.6%) was reported to be preparing the listing of its chipmaking arm. Metals strength following fresh records in gold and silver also supported both indices.

NOTABLE ASIA-PAC HEADLINES

Chinese President Xi had a phone call with Brazilian President Lula, according to Xinhua. China is willing to cooperate with Brazil in different areas.

NOTABLE APAC DATA RECAP

Indian HSBC Composite PMI Flash (Jan) 59.5 (Prev. 57.8).
Indian HSBC Manufacturing PMI Flash (Jan) 56.8 (Prev. 55).
Indian HSBC Services PMI Flash (Jan) 59.3 (Prev. 58.0).
Japanese S&P Global Services PMI Flash (Jan) 53.4 (Prev. 51.6).
Japanese S&P Global Manufacturing PMI Flash (Jan) 51.5 (Prev. 50.0).
Japanese Inflation Rate YoY (Dec) Y/Y 2.1% (Exp. 2.2%, Prev. 2.9%).
Japanese Inflation Rate MoM (Dec) M/M -0.1% (Prev. 0.3%, Rev. From 0.4%).
Japanese Inflation Rate Ex-Food and Energy YoY (Dec) Y/Y 2.9% vs. Exp. 2.8% (Prev. 3%).
Japanese Core Inflation Rate YoY (Dec) Y/Y 2.4% vs. Exp. 2.4% (Prev. 3.0%).
Australian S&P Global Composite PMI Flash (Jan) 55.5 (Prev. 51).
Australian S&P Global Services PMI Flash (Jan) 56.0 (Prev. 51.1).
New Zealand Inflation Rate QoQ (Q4) Q/Q 0.6% vs. Exp. 0.5% (Prev. 1%).
New Zealand Inflation Rate YoY (Q4) Y/Y 3.1% vs. Exp. 3% (Prev. 3%).

NOTABLE APAC EQUITY HEADLINES