Markets Flip: Panic to Rally

Author

FX Rocket Profits
January 26, 2026

In partnership with

A Week of Tariff Drama, Inflation Signals & Risk Reversals

The forex market last week was a rollercoaster of sentiment. Early in the week, Trump’s tariff threat on the EU (via Greenland) rattled investors, sparking a broad USD sell‑off and driving flows into safe havens like JPY and CHF. By midweek, his Davos pivot — ruling out military escalation and shelving the tariff plan — flipped sentiment, unleashing a risk‑on rally. Commodity currencies (AUD, CAD, NZD) surged, while defensive plays retreated.

Meanwhile, inflation data from Canada and the U.S. kept monetary policy in focus. Canada’s headline CPI ticked higher, but core measures softened, hinting at a more balanced BoC stance. In the U.S., December CPI confirmed sticky price pressures, keeping the Fed cautious. Together, these developments reminded traders that geopolitics can overwhelm fundamentals, but data still sets the medium‑term tone.

⚡Weekly Forex Market Recap – Jan 19–23, 2026

  • USD: Fell sharply on tariff threats, then rebounded after policy de‑escalation.

  • JPY & CHF: Benefited from safe‑haven demand early, but lost ground as risk appetite returned.

  • AUD, CAD, NZD: Strong performers, riding the risk‑on wave and commodity support.

  • EUR & GBP: Whipsawed with sentiment; GBP faced added pressure from labor market weakness and inflation volatility.

🔥Macro Highlights

  • Canada CPI: Headline inflation rose to 2.4%, but core slipped below 3% for the first time since March.

  • U.S. CPI: Core inflation steady, reinforcing expectations of a cautious Fed.

  • Geopolitics: Trump’s tariff threat and reversal dominated flows, overshadowing data releases.

  • Tariff Threats & Market Fallout: How Trump’s Greenland gambit shook FX markets before reversing midweek.

  • Inflation Watch: Canada’s CPI mix and U.S. inflation trends — what they mean for central banks.

  • Currency Movers: Why AUD and CAD surged, while GBP struggled despite hotter inflation.

These reads provide a toolkit for navigating volatility: balancing fundamentals with sentiment, staying nimble when headlines hit, and positioning for medium‑term policy shifts.

Happy Trading!

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