2026-01-22 10:35

Jan 22 (Reuters) - Sterling edged up against both the euro and the U.S. dollar after recent economic data painted a mixed picture, bringing the Bank of England rate outlook back into focus. Investor attention shifted to the state ‌of the economy after geopolitics dominated earlier in the week, as the prospect of a U.S.-Europe trade war unsettled markets. Sign up here. Sterling traded at $1.3414, up 0.12%, after showing little reaction to Wednesday's inflation report. The U.S. dollar held on to overnight gains after President Donald Trump withdrew a ‌threat to impose tariffs on several European NATO countries over Greenland. Earlier this week data showed Britain's jobs market weakened, potentially easing the BoE's worries about persistent inflation pressures. "Despite the uptick in the consumer price index, we still see Bank ‍Rate on a downward direction," said Sanjay Raja, chief UK economist at Deutsche Bank, adding the bank is sticking for now to its call for two additional rate cuts. "However, we see ⁠risks as skewed to slower easing in the first half of 2026," he ‍added. The pound held steady on Wednesday, after data showed UK inflation picked up more than expected ‌in December. "UK ‌employment data for November and December were weak, confirming the recent labour market slowdown, and December consumer price data was mixed, but on the cool side," said Felix Vezina Poirier, chief strategist at BCA Research. "More Bank of England cuts will ⁠be required, with barely ⁠two 25 bps cuts priced by year-end," he added, arguing that further weak data could bring an April cut into focus. Morgan Stanley expects the BoE to deliver its next interest rate cut in March. The ‍euro was down 0.05% at 86.96 pence , after hitting 87.45 pence on Wednesday, its highest level this year. The single currency rose 0.63% against the pound on Tuesday in its biggest daily rise since early August. Britain's government borrowed less than expected ‍in December, helped by robust growth in tax receipts, according to data on Thursday. https://www.reuters.com/business/sterling-edges-up-focus-shifts-data-boe-rate-outlook-2026-01-22/

2026-01-22 10:35

Jan 22 (Reuters) - The IMF's first deputy managing director said on Thursday that the uptake of stablecoins in some countries could put pressure on those countries to improve their fiscal and monetary frameworks. "As stablecoins create the potential for additional uptake in, you know, jurisdictions that have weak fiscal and monetary frameworks for dollars, or for other currencies, that creates a competitive pressure on those countries themselves in order to improve their fiscal and monetary frameworks," Dan Katz, the International Monetary Fund's number two official, said on a panel at Davos. Sign up here. Some analysts have raised concerns that the growth of dollar-backed stablecoins could suck deposits out of banks in emerging economies. https://www.reuters.com/world/stablecoins-could-put-competitive-pressure-monetary-frameworks-imf-official-says-2026-01-22/

2026-01-22 10:14

TOKYO, Jan 22 (Reuters) - Japan's plan to return to a primary budget surplus for the first time in decades has been pushed back again, as Prime Minister Sanae Takaichi presses ahead with what she calls a "proactive" fiscal policy. The forecast deficit for the next fiscal year, presented at a meeting of the government's top economic council on Thursday, could be widened even further as it does not account for Takaichi's election promise to suspend an 8% tax on food for two years. Sign up here. The plan, which Takaichi announced on Monday when calling a snap election in February, spooked bond investors, sending the benchmark 10-year Japanese government bond yield to a 27-year high on Tuesday. Suspending the food tax would cost about 5 trillion yen ($32 billion) per year. The primary budget balance, which excludes new bond sales and debt-servicing costs, is a key gauge of the extent to which policy measures can be funded without resorting to debt. The latest projection shows a primary budget deficit of 800 billion yen ($5 billion) for fiscal 2026 starting April, compared with an earlier forecast of a 3.6 trillion yen surplus — a reversal driven largely by 21.3 trillion yen in stimulus spending under Takaichi that was launched late last year. The government now expects to achieve a 3.9 trillion yen surplus in fiscal 2027, assuming that Japan's economy will continue to grow at a modest pace. PLANS TO RETURN TO SURPLUS DELAYED MANY TIMES Except for the asset bubble period between 1986 and 1991, Japan's primary budget balance has been in deficit for most of the postwar era, resulting in a vast debt pile more than twice the size of its economy, the worst among developed economies. Plans to return to a budget surplus - a goal first introduced in the early 2000s - have been pushed back multiple times. Takaichi has said she would reverse fiscal austerity and set a new fiscal target extending through several years to allow more flexible spending, rather than checking progress toward achieving the surplus target each fiscal year. Takaichi said on Thursday at the end of the council meeting she would aim to secure the confidence of financial markets by stably reducing the debt-to-GDP ratio. She didn't comment on the recent bond market rout, but mentioned a proposal from the council's private-sector members that confirming the level of interest payments on debt is important for maintaining credibility in a phase of rising interest rates. ($1 = 158.3500 yen) https://www.reuters.com/world/asia-pacific/japans-budget-surplus-plan-faces-further-delay-takaichi-pushes-spending-2026-01-22/

2026-01-22 10:08

MUMBAI, Jan 22 (Reuters) - The Indian rupee broke its six-day declining streak by staging a mild recovery on Thursday, supported by an improvement in risk appetite after U.S. President Donald Trump stepped back from tariff threats against Europe linked to Greenland. The rupee opened higher against the dollar, but gave up some of the gains after it was unable to rise past the 91.50 per dollar level. The currency ended at 91.63, higher than its previous close and the record low of 91.7425 per dollar hit on Wednesday. Sign up here. Traders said the move resembled the typical pattern of trade in the last few days, where recoveries in the rupee are struggling to hold. The local currency plunged 0.8% on Wednesday to an all-time low of 91.7425 per dollar despite intermittent dollar selling by the central bank . "Trump's latest remarks eased fears of a broader U.S.–Europe trade dispute, offering some relief to emerging market currencies, including the rupee," said Dipti Chitale, CEO at Mecklai Financial Services. Still, she said delays in a U.S.-India trade agreement is hurting exports that face a steep 50% tariff, while steady dollar demand from importers is weighing on sentiment. U.S. equities and Treasuries rallied after Trump said the U.S. would not proceed with tariffs on Europe that were scheduled to take effect from February 1, speaking at the World Economic Forum in Davos. His remarks provided relief to Asian currencies, including the struggling rupee, as they ruled out an immediate flare up in trade tensions the use of force to capture Greenland. Dollar demand and capital flows will continue to dominate currency moves, especially as foreign investors have withdrawn nearly $3 billion from Indian equities so far this month, which follows $18 billion of outflows last year. https://www.reuters.com/world/india/rupee-breaks-six-day-losing-streak-after-trump-drops-greenland-related-tariff-2026-01-22/

2026-01-22 07:51

BEIJING, Jan 22 (Reuters) - China defended its wind power development and reinforced its commitment to promote global green and low carbon transition, after U.S. President Donald Trump's criticism at the World Economic Forum annual meeting. "China's efforts to tackle climate change and promote the development and application of renewable energy in the world are obvious to all," Guo Jiakun, a spokesperson at the Chinese foreign ministry, said at a regular press conference. Sign up here. Trump said in his speech to global elites in Davos, Switzerland, that China makes almost all of the windmills but he had not "been able to find any wind farms in China," characterising China's buyers as "stupid". https://www.reuters.com/business/energy/china-defends-wind-power-strategy-after-trumps-criticism-davos-2026-01-22/

2026-01-22 07:45

Britain runs smaller budget deficit than expected in December Data raise chance borrowing forecasts for 2025/26 will be met Long-term political pressures hang over budget outlook MANCHESTER, England, Jan 22 (Reuters) - Britain's government borrowed less than expected in December, according to data on Thursday that may give finance minister Rachel Reeves reasons for optimism in 2026, even if political risks at home and abroad dog the longer-term outlook. Public sector net borrowing stood at 11.578 billion pounds ($15.55 billion) in December, the Office for National Statistics said, down 7.1% on a year ago. Sign up here. Economists polled by Reuters had mostly expected 13.0 billion pounds of public sector net borrowing last month. Reeves has faced a challenging year-and-a-half in charge of Britain's economy. She was forced to increase taxes again in her November budget to build a larger buffer against her fiscal rules, as she sought to retain the confidence of investors. "The December figures offer cautious reassurance. Borrowing remains elevated in absolute terms, but the trend is moving in the right direction," said Joe Nellis, economic adviser at MHA, an accountancy and advisory firm. Some predict Reeves' tough budget stance could be rolled back however, as political pressure on the Labour government - trailing badly in opinion polls - rises through the year. Government receipts in December stood 8.9% higher than a year ago, the ONS said. Britain has borrowed 140.4 billion pounds over the first nine months of the 2025/26 financial year, compared with 140.8 billion pounds at the same point last year. In November, the Office for Budget Responsibility projected borrowing for the entire year of 138.3 billion pounds, which takes into account an expected January surplus. The forecaster said on Thursday that borrowing was currently running around 4 billion pounds lower than it forecast in November - but is far higher than it anticipated in March, underscoring the uncertainty around such predictions. DOUBT HANGS OVER BORROWING OUTLOOK While the latest forecast looks a good bet, Pantheon Macroeconomics economist Elliot Jordan-Doak said political questions surrounding Prime Minister Keir Starmer's Labour government hung over the outlook in the longer term. "We continue to think (Reeves') package of large, backloaded tax hikes and harsh real-terms spending cuts remains vulnerable to reversal as political pressures mount," he said. "A messy leadership contest this year - likely triggered by a poor performance for the government at the local elections in May - would also likely trigger a correction in gilts, boosting borrowing costs." Unstable geopolitics - with the relationship between the U.S. and its historic European allies deteriorating - could also hurt Britain's economy, although Reeves said on Wednesday her plans for the economy would not be buffeted. She doubled her headroom against the fiscal rules to 22 billion pounds in her last budget, but successive governments have failed to meet their own rules despite having even larger buffers. For now, the picture differs from January 2025, when gilt yields soared during a global bond sell-off that forced Reeves to reassure investors of her commitment to fiscal discipline. Gilt auctions held during January 2026 have shown some of the strongest demand for British debt on record. ($1 = 0.7452 pounds) https://www.reuters.com/world/uk/borrowing-data-offers-early-new-year-cheer-uks-reeves-2026-01-22/