EU and India Finalize Grand Remedy Against the Trade Restraints of the United States & China – Currency Thoughts
EU and India Finalize Grand Remedy Against the Trade Restraints of the United States & China
January 27, 2026
Perhaps motivated by a desire to deflect attention away from the mess that ICE has made in Minneapolis, President Trump wielded the tariff weapon once again, threatening South Korea with a 10 percentage point jump to 25% in the U.S. tariff imposed on that economy’s exports to the United States. That gambit, however, was overwhelmed by the news of the European Union and India agreeing to terms on a 7-year free trade agreement between them. Together these two economies represent a huge proportion of world trade, so this action seems to be a bellwether of the many significant options that the rest of the world has to move on from a U.S. alliance of the free world, a shift that in time should diminish America’s inherent advantages in world trade and finance since WW2.
Dollar losses were extended overnight by 0.8% against the Swiss franc, 0.5% versus the Japanese yen, and 0.4% relative to the euro, sterling and Australian currency. For the first time in about 4-1/2 years, the dollar has slipped against the euro below its level when the joint European currency was launched at the start of 1999. Against the yen and amid speculation that joint intervention by the Bank of Japan and Federal Reserve might be in the works, the dollar has plunged 3.8% from it peak last Friday.
Downgraded confidence in America is also reflected in 10-year sovereign debt yields during the past month. Whereas the U.S. Treasury yield has climbed 11 basis points, comparable increases in that span amount to two basis points in Germany, France, Italy, Spain, and the 10-year Canadian yield is unchanged. The biggest move today was a 5-basis point jump in the 10-year Japanese JGB yield, extending its move during the past month to 25 bps,
U.S. stock market futures today prior to the opening bell are so far mixed, with the DOW down 0.5%, but the Russell 2000, SPX and Nasdaq showing gains. Among overseas equity indices, those in South Korea, Hong Kong, Australia, Japan, and Taiwan closed with gains today of 2.7%, 1.4%, 0.9%, 0.9%, and 0.8%. The British, French and Italian stock markets so far are up 0.4% today.
Silver has retraced 3.5% so far this Tuesday but remains well above the $100 per ounce threshold. Gold‘s price is flat, while Bitcoin and oil have drifted 0.4% and 0.3% lower.
A few countries reported their 2025 trade balances. Mexico recorded a USD 0.8 billion surplus versus a $18.5 billion deficit in the prior year. Sweden’s surplus widened 48% from SEK 63 billion in 2024 to 94 billion kronor in 2025. Hong Kong‘s deficit widened 17.5% to HKD 447 billion, and the Filipino deficit narrowed 9.4%.
Investors were relieved to learn that the three-year streak of declines in Chinese industrial corporate earnings of 4.0% in 2022, 2.3% in 2023 and 3.3% in 2024 ended this past year with a 0.6% rise during 2025.
Japanese corporate service prices rose 2.6% year-on-year in December, their smallest 12-month rate of increase in 20 months.
A 2.7% year-on-year drop in Swedish producer prices this months was the sixth deflationary reading in the past 8 months.
A 12-month 1.5% rise of British shop prices in January was its largest gain in 25 months.
French consumer confidence conformed to the recent steady pattern in January some 10% below its long-term average. The triple whammy of Covid, Russia’s aggressive foreign policy and U.S. tariffs have kept the index below the long-term average ever since October 2021. The reading of 90 in 3 of the past 4 months compares to 107 in shortly before the Covid pandemic began.
In Finland, which shares a long boundary with Russia, consumer confidence fell to an 11 month low this month and has posted a sub-zero reading since March 2022, just weeks after the invasion of Ukraine.
The policy interest rate at the National Bank of Kyrgyzstan was left unchanged at 11.0% after this month’s review. Three hikes last year in July, October and November reversed a two percentage point rate cut done in May 2024 but left the interest rate three percentage points below the peak of 14% from March to November of 2022. Consumer price inflation is currently measured at 9.4% versus the central bank’s targeted 5-7% corridor.
U.S. house price inflation in November edged up 0.1 percentage point to 1.9% according to the FHFA house price index and 1.4% according to the Case Shiller index of 20 metropolitan centers. Still ahead today: the Conference Board’s measure of U.S. consumer sentiment.
Copyright 2026, Larry Greenberg. All rights reserved.
Tags: EU-India trade deal, French consumer confidence, National Bank of Kyrgyzstan
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