Financial markets recover following Trump speech

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waterman

Written by Dan Waterman
January 22nd 2026
So it's another TACO situation for now, but what happens with Greenland is not settled yet..

'Trump Always Chickens Out' has occurred once again with minimal 'damage' this time round compared to what we witnessed last year with his tactic.

President Trump backed down 
from his threat to impose new tariffs on the EU and take Greenland by force in his speech in Davos yesterday afternoon. This prompted financial markets to regain some earlier lost ground, including £-€ which clawed back an expected 0.5%.

But we are not out of the woods with this yet..

The supposed 'framework deal' between Trump and NATO Secretary General Mark Rutte, didn't consult either Greenland or Denmark. Neither was there a proposal of the sovereignty of Greenland, so this episode is far from over (but at least has been de-escalated).

Trump attacked Fed Chair Powell once again and looks to be losing at the Supreme Court as far as the Fed's independence goes. This is $ negative near-term, but possibly $ positive in the months ahead as the Fed may look to hold interest rates until a new Fed Chair arrives in May.

Finally and some good news for Chancellor Reeves.

Firstly, UK Bonds have fallen back down to Monday's level after spiking the last 2-days. Secondly, the UK Government borrowed less money than anticipated in December and was further boosted by a downgrade in borrowing in November too.

Government borrowing remains eye-wateringly high, but December's number of £11.6bn (£13bn forecast) is insanely less than December 2024's £18.7bn..