19 January 2026: How does Greenland compare to the Chagos?

Sir Keir Starmer finds himself in another difficult situation following Donald Trump’s decision to impose tariffs on countries that defy his demand to take control of Greenland.

The Prime Minister is "undermining" his own defence of Greenland, given that he handed over the Chagos Islands without the Chagossians' approval.

On Saturday evening, Starmer condemned Donald Trump's "fundamentally wrong" decision to slap 10 percent tariffs on the UK and other European nations in an attempt to strike a deal with the continent over the Arctic territory.

The Prime Minister further reiterated that the fate of Greenland should be determined by the nation's people. Still, his argument does not extend to the likes of Chagossians, many of whom have long campaigned for British sovereignty over the archipelago.

The President announced in a Truth Social post that the European levies would apply from February 1, issuing a warning to nations including the UK, France, Germany, and Norway after they deployed troops for a military exercise on the island.

Trump was roundly condemned by European leaders after announcing he would impose new tariffs on countries exporting to the US unless he acquired Greenland.

Whisky distillers, food producers and car manufacturers will be particularly anxious about the new levies. It would take UK steel exporters to 35% in taxes.

The new tariff regime will kill off any early hopes that Scotland’s First Minister John Swinney had of securing lower tariffs for Scotch whisky exports after his headline-grabbing visit to the White House last September.

The UK economy could take a hit of up to £6 billion this year if President Trump presses ahead with new trade tariffs in response to the dispute over Greenland, with the car industry likely to be the worst affected.

British companies have been threatened with another 10 percent increase on goods exported to America from February 1, rising to 25 percent in June, on top of the 10 percent currently levied.

However, the impact of higher tariffs was likely to be contained to a small number of industries, economists have said, noting that the UK has so far proven more resilient than previously expected amid Trump’s trade policies.

The British economy shrugged off Budget uncertainty in November, growing by a faster-than-expected 0.3%, according to the latest official figures.

The pace of GDP growth was the strongest recorded since the 0.4% seen in April and will be seen as a boost for Rachel Reeves after a challenging year for the Chancellor.

However, it makes it less likely that the Bank of England will deliver another interest rate cut next month.

It ended a prolonged stagnant period when the economy shrank by 0.1% in July and October, was flat in August and eked out just 0.1% growth in September.

The City had been expecting November GDP growth of just 0.1%.

The figures have been boosted by a full return to production at Jaguar Land Rover following a devastating cyberattack and by strong growth in the tech sector.

The City will be eager to see December’s data to get a picture of the year as a whole and understand the overall impact of the JLR shutdown.

Last week, the pound rallied after three “down” weeks. It reached a high of 1.3408 and closed at 1.3391.

Taming the U.S. economy is easier said than done, President Donald Trump is learning.

A year since his administration returned to the White House, almost every hardship that he broadly promised to fix during the presidential contest, halving energy costs, making housing affordable or ending inflation, either remains a problem or has got worse, economic indicators show.

By shifting the focus to the Federal Reserve's performance and its Chairman in particular, Trump has been accused of trying to fool the market into believing he has done all he can, and the fact that interest rates have not fallen as quickly as he would have liked is the main issue.

"Growth is exploding, productivity is soaring, investment is booming, incomes are rising," Trump said last week while speaking to the Detroit Economic Club. "Inflation is defeated."

In fact, the current rate of inflation, 2.7%, is virtually unchanged from the 2.8% rate of Trump's first month in office.

About 53% of U.S. adults said the national economy has become somewhat or much worse off since Trump became president again, an Associated Press Centre for Public Affairs Research survey released two days after that speech found.

Another twist in the politics-adjacent saga of the next Federal Reserve chair has taken place.

Betting markets went berserk after President Donald Trump signalled that he may keep National Economic Council Director Kevin Hassett, a top contender to be the next Fed chief, in the White House.

Meanwhile, Fed watchers opined that former Fed Governor Kevin Warsh’s candidacy shot through the roof because he was seen as the more independent candidate to replace Jerome Powell in May, which is what investors have maintained is crucial to financial and economic success.

Betting markets went berserk after President Donald Trump signalled that he may keep National Economic Council Director Kevin Hassett, a top contender to be the next Fed chief, in the White House.

Meanwhile, Fed watchers opined that former Fed Governor Kevin Warsh’s candidacy shot through the roof because he was seen as the more independent candidate to replace Jerome Powell in May, which is what investors have maintained is crucial to financial and economic success. But the President, who has been teasing reports about his eventual nominee for months, has made it clear that he would demand loyalty from whomever he nominated, especially when it comes to slashing interest rates by 1% or more.

Federal Reserve Bank of Boston President Susan Collins emphasised the importance of Central Bank independence in a speech on Friday.

Speaking at a conference in Massachusetts, Collins highlighted that Congress established "a Central Bank that, while accountable, has the independence required to make the tough calls that may be unpopular in the short term."

Collins noted that this independence enables the Federal Reserve to better "deliver price stability and maximum employment over the long term."

She also described the Fed’s structure as a "wisely" designed federated system, according to her prepared remarks.

However, with job growth cooling and inflation easing, Fed Governor Michelle Bowman said the Fed should be ready to move toward neutral, even as Trump pressures Powell and a probe adds political noise.

The “Trump-appointed” Fed governors, of which Bowman is one, have been tight-lipped over the possible indictment of the Fed Chairman.

The dollar index does not know “which way to turn” following a tumultuous start to the year, to put it mildly. Following market expectations that it would mount a challenge on the 100 level, the index reached a high of 99.45 last week and closed at 99.37. Investors and traders are trying to understand the implications of new tariffs. It has been noted that while tariffs have been less than ideal for G7 economies, their effect on the U.S. economy has not been as significant as Trump had promised.

The level of US inflation could make it “economically difficult” for the European Central Bank to keep interest rates at 2%, Philip Lane, its chief economist, has said.

He told reporters that the ECB’s Governing Council would not be discussing the possibility of a rate change in the near-term, but warned it would be “economically difficult” for the bank to hold rates at 2% if inflation in the US did not return to target.”

He said issues could arise “if financial conditions in the US spilt over to a rising term premium,” and that “there were scenarios where, if the Federal Reserve departed from its mandate,” which would “create a problem.”

It comes as US President Trump again called for the Fed to cut interest rates after December inflation came in at 2.6%.

"We have very low inflation. That would give 'too late Powell' the chance to give us a nice, beautiful, big rate cut," Trump told reporters.

Speaking with Italian newspaper La Stampa on Friday, Lane said 2026 was “an important transition phase,” as the ECB expected to see a move to a more “sustainable” 2% inflation rate.

The ECB cut interest rates by a quarter point to 2% last June after it said headline inflation was around 2%. Lane said, however, that “excluding energy,” which he said was “actually negative”, inflation was still “around 2.5%”

In December, it held interest rates for the fourth time, after officials hinted that the era of rate cuts was “over”.

It had long been expected there would be no further rate cut in 2025, with ECB President Christine Lagarde in October saying the outlook was “more uncertain than usual due to the still volatile global trade policy environment.”

The Eurozone's economy starts the year in pretty decent shape. There's vaguely decent growth, and inflation is bang on target. No wonder the European Central Bank keeps referring to being in a "good place". But there's a real danger here. As other countries flex their economic muscles, Europe has to commit to higher defence spending, invest in high-tech, and pursue further reforms. If it doesn't, 2026 could be a year of reckoning.

Germany’s economy finally appears to be turning a corner following two years in the doldrums. Europe’s largest economy expanded by 0.2% in 2025 according to yesterday’s full-year growth figures, snapping a couple of years of outright contraction.

While not exactly stellar, 2026 is expected to be significantly better, with the country’s massive infrastructure spending programme likely to provide a material boost to employment, investment and consumer spending this year. Last week’s encouraging factory output figures suggest that we are finally beginning to see this reflected in activity data.

The Euro is trading on the back of the fact that it makes up two-thirds of the dollar index. This means that dollar volatility naturally spills over into the common currency. Last week, it fell to a low of 1.2584 and closed at 1.1599.

Have a great day!