UBS On-Air: Market Moves UBS On-Air: Paul Donovan Daily Audio 'Credibility and the “sell US” trade'
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Jan 20, 2026 Fueled by recent tariff threats from the US administration, the Treasury bond market is seeing some shaky reactions. The potential for increased US inflation could undermine the dollar's status as a reserve currency. Meanwhile, Trump's dramatic proposal to tax French wine buyers adds a quirky twist to the diplomatic landscape. On a different note, rising household incomes and firm employment in the UK suggest a resilient labor market, even as the Bank of England faces pressure to ease rates due to inflation normalization.
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Tariff Talk Weakens Treasuries
- Tariff threats prompted a modest sell-off in US Treasuries reflecting worries about higher US inflation and dollar reserve-status erosion.
- Markets currently treat these tariff threats as only moderately credible rather than decisive financial shocks.
Markets Discount Some Threats
- Markets judge some tariff threats as less likely to be executed, reducing immediate impact on asset prices.
- President Trump’s wine-related threat is seen as especially unlikely to be followed through by markets.
UK Jobs Stay Strong; Saving Rises
- UK labour market remains firm with steady unemployment and rising real household incomes from wage growth.
- Higher incomes have not translated into proportional spending because households are saving more recently.