24/01/2026 by Tony Redondo
The 2026 World Economic Forum in Davos marked a historic shift, as President Trump transformed the traditional sanctuary of globalist ideals into a high stakes trading floor. Leveraging a record-breaking stock market and surging domestic energy production, Trump bypassed diplomatic niceties in favour of “energy realism” and transactional power. This forced a sceptical elite into a state of cold pragmatism, recognizing that the post-WWII international order has finally given way to a sharper, more volatile reality.
The week was defined by the surreal standoff over Greenland. By framing the Arctic territory as a “strategic piece of ice” and a necessary trade-off for American protection, Trump signalled a move toward a power-based alliance system. Although a deal with NATO’s Mark Rutte eventually de-escalated immediate tariff threats and calmed market sentiment, the message was unmistakable: territorial inviolability is no longer a given.
The energy divide further illustrated this rupture. Trump dismissed European climate initiatives as a “Green New Scam,” urging a return to fossil fuel extraction, while EU leaders like Ursula von der Leyen countered by framing green energy as a national security imperative for “strategic autonomy.” As Canadian Prime Minister Mark Carney noted, this isn’t a mere transition but a total break from the past. The “rules-based” era has ended, replaced by a world of intensifying great-power rivalry where economic integration is no longer a bridge, but a primary weapon of war.
Currency Exchange Rates Update
The Pound ended the week little changed against the Euro but remains over 0.6% up in the last month against the single currency.
Against the US Dollar, the Pound ended the week 2% up at its best level since mid-September.
The biggest move in the week was a sharp fall against the Australian Dollar with the Pound slumping at one point to a 12-month low against the Aussie.
This week, the key economic data releases include:
Monday Germany IFO Business Sentiment Survey
Tuesday US Consumer Confidence Index
Wednesday Australia CPI Inflation
Canada BoC (Bank of Canada) Interest Rate Announcement
US Fed Interest Rate Announcement
Thursday Sweden Riksbank Interest Rate Announcement
EU Consumer Confidence
US Trade Balance & Factory Orders
Friday France GDP
Spain GDP
Germany GDP, CPI Inflation & Unemployment
Italy GDP
EU GDP & Employment
Canada GDP
US PPI Index
What’s in the news?
Sir Keir Starmer faces a backbench backlash if Labour’s NEC (National Executive Council) blocks Andy Burnham from contesting the Gorton and Denton by-election. Despite allies’ plans to bar the popular mayor to prevent a leadership challenge, high-profile MPs demand democratic member-led selections, warning that factionalism risks party unity amid Starmer’s record-low approval ratings.
In a further significant blow to Sir Keir, the High Court granted Reform UK a legal challenge against Labour’s decision to delay elections for nearly four million people. Scheduled for February, the case contests the postponement across 30 councils, which Nigel Farage claims suppresses Reform’s surging momentum in the polls.
UK
The UK economic backdrop has made grim reading for much of the past six months. November’s headline GDP rate of 0.3% was better than feared but should not be a cause for celebration. Monthly GDP data is always volatile, and the broader picture remains concerning with the British economy bumping along at very slow rates of growth. Per capita GDP is at the same level as 2022 and is in fact only 7% above the levels just before the 2008 GFC (Great Financial Crash) leading some commentators to say the UK is in a period of serious economic stagnation. The data shows construction activity falling sharply again, consumer and business confidence remain subdued, and forward-looking survey data in sectors such as retail and construction point to further weakness ahead.
The uncomfortable truth is that this Labour government talks about growth but is doing very little to pursue it in practice. Instead, it has prioritised redistribution, higher spending, and an ever-expanding role for the state. The result is a sustained assault on the “animal spirits” that drive private investment, innovation, and job creation. Without a decisive change in course, the UK risks remaining trapped in a vicious cycle of weak growth, worsening public finances, and ever higher taxes.
Aldi issues cost of living warning as thousands of shoppers hit by ‘£800 postcode penalty’
Zoopla reports that the number of homes for sale has reached its highest level in eight years, largely driven by a 16% rise in London.
London rents ended the year lower than where they started for first time on record with the average London tenant spending £63 less in rent per calendar month than at the start of 2025.
Good news
The latest British Retail Consortium-Opinium index Consumer shows consumer confidence in the UK reached a five-month high in January.
Growing tax receipts and a gradual easing in some areas of spending pressure of late has left the UK’s fiscal position more stable than many had feared. Public sector net borrowing for the month is estimated at around £11.5bn, lower than market expectations and the same period a year earlier. The December figures offer cautious reassurance. Borrowing remains elevated in absolute terms, but the trend is moving in the right direction. Slowing inflation and moderating earnings growth are beginning to reduce upwards pressure on public sector spending, particularly on inflation-linked items.
The implications for government bond markets are broadly positive. Lower-than-expected borrowing should reassure investors that the Government’s long-term fiscal strategy is sustainable. Combined with the hope of an interest rate cut in Spring, this supports a more stable outlook for gilt yields. While yields are likely to remain sensitive to global developments, the near-term risk of sharp upward pressure appears to have diminished.
Not so good news
A new report by the left-wing Resolution Foundation says the UK economy is ‘languishing’ behind its peers as living standards stagnate and urge Rachel Reeves to ramp up growth plans. The report states that the UK was “languishing” 15% behind the likes of Germany, France and Canada in GDP per head and bemoans the government’s indecisiveness, claiming policy uncertainty had been greater over the course of this parliament “than any of the previous seven” Conservative governments. The lack of progress on planning reform and boldness on trade were highlighted as key areas where government policymaking has fallen short of expectations among Resolution Foundation researchers.
The IMF (International Monetary Fund) expects the UK economy to grow at a slower pace than the average across advanced economies in each of the next two years. The IMF has kept its UK growth figures for 2026 and 2027 at 1.3% and 1.5% respectively in its latest world economic outlook report. Each figure is lower than the average growth for advanced economies in 2026 and 2027, with the UN-backed body suggesting GDP would rise by 1.8% and 1.7% in each of the next two years.
The ONS (Office for National Statistics) reported that the UK lost nearly 1,400 jobs a day last month, totalling 43,000. The hiring slump in December marks the largest drop since November 2020.
The ONS data also shows public sector wages surge while private pay growth hits a 5-year low. The ONS said public sector workers saw annual earnings rise by 7.9%, compared with just 3.6% for those in the private sector.
The IPPR (Institute for Public Policy Research) reported that UK jobs are at risk due to reliance on trade with China. The report highlights that around 90,000 jobs, particularly in clean energy and automotive sectors, could be threatened by geopolitical tensions. The report calls for the Government to adopt strategies like stockpiling, investment partnerships and ‘keepshoring’, the retention of domestic production capacities to mitigate risks from potential disruptions.
New ONS data shows UK CPI (consumer price index) inflation, the headline measure for price growth, hitting 3.4% in the year to December, slightly higher than the 3.3% forecast. In worrying news for UK households, food price inflation hit 4.5% compared to 4.2% in the previous month. This data release is the last inflation figures the BoE (Bank of England) policymakers will see before they decide on whether to cut interest rates when they next meet on 5 February. The BoE is not currently expected to cut interest rates from their current 3.75% level.
Analysis by the LCCI (London Chamber of Commerce and Industry) suggests confidence among businesses in the capital is at an unprecedented low. The LCCI’s quarterly survey revealed that only 25% of businesses expect economic improvement in 2026. The Employment Rights Bill is cited as a key factor, with many employers hesitant to hire due to increased costs and risks. LCCI chief executive Karim Fatehi said, “Employment protections are vital, but the balance of power has tipped too far the other way.”
The HBF (Home Builders Federation) say Britain’s housing market has locked at least 1.5m people out of owning their own home. Home ownership rates have fallen from 71% in 2003 to 64.8% in 2024, with younger people increasingly renting or living with parents. Developers cite poor affordability, high house prices, larger deposit requirements, stricter lending rules and higher interest rates as key barriers for first-time buyers.
Hamptons report that the share of UK homes bought by landlords fell to a record low in 2025, with investors accounting for just 10.9% of purchases. The decline reflects higher taxes and tighter regulation, including a rise in the stamp duty surcharge to 5% and the end of the stamp duty holiday. Further pressure comes from Labour’s Renters’ Rights Act, which bans no-fault evictions and introduces rolling tenancies from May 2026, alongside a planned income tax rise on rental earnings. Many landlords are exiting the market, with Rightmove reporting one in three considering selling. Analysts warn reduced landlord appetite could tighten rental supply and push rents higher.
Vanguard, the world’s second largest asset manager, said it would reduce its £52bn Life Strategy fund’s UK equity allocation from 25 to 20%, offloading roughly £1.9bn worth of stocks and their UK bond exposure will also be cut from 35 to 20%. The move comes despite the UK government’s attempts to increase domestic investment in London listed equities to ultimately boost the economy.
USA
The Federal Reserve is expected to leave interest rates alone on Wednesday after three successive interest rate cuts after receiving confirmation that inflation remains elevated and the job market remains steady. The Commerce Department reported last Thursday that inflation ticked up to 2.8% in November while the Labor Department said new jobless claims were similarly little changed last week. In another sign of economic resilience, the Commerce Department also said that GDP increased in the third quarter of 2025 at its fastest pace in two years.
Economists surveyed by The Wall Street Journal increased their estimates for economic growth in 2026, while Apollo’s chief economist noted prediction markets have slashed their bets on a recession. Goldman Sachs’ chief US economist went further, arguing that the bank’s “strongest conviction views for 2026 are our above-consensus GDP growth forecast and our below-consensus inflation forecast.”
The US is absorbing an outsized share of global capital flows, attracting roughly 20% of worldwide inbound investment as firms respond to Trump’s tariffs, pressure tactics and the relative resilience of the US economy. Foreign corporations, from European pharma to Asian automakers are pledging large new US investments whilst Mexico and Latin America position themselves as extensions of the US supply chain, with companies investing there because of proximity to the US.
The US is looking to Australia and Africa for minerals in an attempt to sidestep Chinese restrictions. The US uranium group Energy Fuels will buy an Australian miner for $300 million, the latest deal involving the two countries since Beijing placed export controls on refined rare earths in 2025. Washington and Canberra have also agreed to each invest $1 billion in mining projects to bolster supply chains. The Democratic Republic of Congo, meanwhile, offered the US access to an array of state-owned mining projects, producing cobalt, copper, gold, lithium, and manganese in exchange for development investment and security guarantees.
Washington and Beijing have signed off on a deal to sell TikTok’s American business to a consortium of mostly US investors, capping a year’s long battle between the two superpowers over the app.
Analysts and economists downplayed the possibility of foreign investors exiting US assets en-masse after a Danish pension fund and a major global bond investor said this month they were diversifying away from US bonds. Europe is cumulatively the largest holder of US Treasurys but if European nations did try to dump their holdings, the sheer size of the American market means they would struggle to reallocate those resources elsewhere according to a former Federal Reserve vice-chair. The FT warned that any fire sale could end up harming European investors even more than Washington itself.
The EU
Eurozone inflation fell to 1.9% in December according to the EU’s statistics agency, just below the 2% ECB (European Central Bank) target.
For the first time, wind and solar power overtook fossil fuels last year as a source of electricity in the EU. The milestone was hit largely thanks to a rise in solar power, which generated a record 13% of electricity. Together, wind and solar hit 30% of EU electricity generation, edging out fossil fuels at 29%.
Poland began the largest overhaul of its navy since the Cold War to bolster defences in the face of Russian expansionism and transatlantic tensions. Warsaw is proportionally NATO’s biggest spender, with 4.7% of GDP going to defence, but its maritime forces have largely been neglected. Moscow’s escalating hybrid warfare, however, has heightened security concerns in the Baltic Sea, and Europe is stepping up coordination and production. Poland is buying three new submarines from Sweden and is expected to sign a defence agreement with the UK.
Société Générale announced its plan to axe 1,800 of its staff in France last Thursday. Chief executive Slawomir Krupa is attempting to slow down spending by reducing the jobs available in France by 1,800 out of 40,000. The bank is looking to avoid large job cut programmes that have high redundancy payouts and leave gaps in staff and instead will pursue the job cuts through voluntary leave or retirement.
Others
China’s GDP grew 5% last year as booming exports offset more anaemic growth in the domestic economy, meeting Beijing’s target but highlighting a widening gap in the country’s two-track economy. China’s export industries weathered US tariffs with Beijing’s trade surplus reaching a record $1.2 trillion in 2025, but anaemic domestic consumption and a faltering real estate sector weighed on growth. The world’s second-biggest economy faces plenty of other challenges, too, including the threat of persistent deflation, elevated youth unemployment, and a huge and opaque pile of local-government debt. Retail sales rose just 0.9%, missing expectations and slowing from 1.3%, underscoring fragile domestic demand even as inflation climbed to a 21-month high. Industrial production was a bright spot, rising 5.2% versus expectations of 5%.
China’s birthrate fell to its lowest level on record in 2025, and its population shrank for a fourth consecutive year. China’s issue is acute, with a growing cohort of retirees and a shrinking number of workers, all grappling with a threadbare social-safety net. To date, Beijing’s efforts to boost childbearing, ranging from increased support for childcare to doing away with the one-child policy have been “met with a collective shrug” by young people according to the NYT.
Demographics – Cosmos Currency Exchange
The 2025 cyberattack at the CIRO (Canadian Investment Regulatory Organization) affected roughly 750,000 Canadians. Founded in 2023, CIRO is Canada’s national self-regulatory body that oversees investment dealers, trading activity, and market integrity. In mid-August 2025, CIRO disclosed a cyberattack and data breach, saying it was forced to shut down parts of its infrastructure and launch an ‘extensive forensic investigation’ to better understand what happened. The investigation is complete and found approximately 750,000 Canadian investors have had sensitive data exposed by the hackers.
Australia’s leading index rose by 0.42% in December from 0.20% in November, signalling activity just above trend over the next 3–9 months. The improvement supports Australia’s gradual recovery into 2026, though momentum remains far weaker than the pace usually seen when readings climb above 1%. The gain was driven mainly by stronger commodity prices, especially gold and copper and a rebound in dwelling approvals. Other components were mixed: firmer labour market signals were offset by weaker consumer sentiment, equity performance, yield spreads, and US industrial output. Employment surged by 65.2k, driven by a 54.8k jump in full time positions, far above the +27k forecast. The jobless rate dropped to 4.1%, beating expectations of 4.3% and the RBA’s December projection of 4.4%. Next week’s inflation data could determine what the RBA (Reserve Bank of Australia) do at their next policy meeting due on 3rd of February.
New Zealand’s manufacturing sector surged in December, with the PMI climbing to its strongest reading since December 2021. BNZ economists said the result shows momentum in a recovery already underway, pointing to stronger domestic demand, improved export activity, and renewed business confidence. Government officials noted the sector is now outperforming major global economies, entering the new year with renewed strength and underscoring manufacturing’s central role in jobs, exports, and growth.
Spot gold prices have had an extraordinary start to 2026, rising by over 15% in the month to date but beaten by the price of silver which has risen by approximately 43%, nearly tripling the percentage gain seen in gold and crossed the psychologically critical $100 per ounce mark for the first time in history last week.
Silver smashes through $100 today with gold nearing $5,000
Stranger than fiction
According to The Wall Street Journal, the largest generational wealth transfer in history is underway. Roughly 1.2 million individuals are set to pass down more than $38 trillion to their Gen X and millennial descendants in the next decade, some $17 trillion of that in the US. Much inheritance may go to funding elder care, with the proportion of the US population aged over 85 is expected to triple by 2050.
London’s chimney sweeps are making a comeback, using a combination of traditional tools and digital technology. The UK’s housing stock is among the world’s oldest with 38% of homes built before 1946 and chimneys are commonplace. Clean-air laws mean they are rarely used, but the country’s growing energy costs have led some to seek backup heating methods and reopen their fireplaces. According to the sweeps’ industry body, there are around 750 registered London sweeps now, up from 590 in 2021.
Quote
Ernest Hemingway, “The Six Ethics of Life: Before you pray: Believe. Before you speak: Listen. Before you spend: Earn. Before you write: Think. Before you quit: Try. Before you die: Live.”
