Euro And Pound Weaken Vs US Dollar Over Greenland Escalation

The euro and pound weakened against the US dollar on Monday as markets turned risk-off following the US escalation over Greenland.

Markets were shaken on Monday after the United States escalated its stance over Greenland, re-igniting trade war fears and pushing investors firmly into risk-off mode.

The White House announced new tariffs on several European countries, with Greenland emerging as a fresh geopolitical flashpoint.

A proposed 10% tariff is set to rise to 25% if negotiations over the sale of Greenland fail, a move that has rattled global markets.

Despite the U.S. markets being closed for Martin Luther King Day, trading has been far from quiet.

US equity futures are sharply lower, with Nasdaq futures down around 1.5%.

European markets are also under pressure, with Germany’s DAX shedding roughly 1.4%.

Bitcoin is down close to 3%, while precious metals are rallying, with silver up more than 3%.

The US dollar is the main currency mover, sliding around 0.3% as investors reassess geopolitical risk.

The Greenland Issue

Tensions surrounding US efforts to acquire Greenland have been building for months and have now reached a critical point.

Over the weekend, President Trump formalised a two-tier tariff regime aimed at eight European nations that have opposed the sale of the autonomous Danish territory.

Under the proposal, a 10% tariff will be applied to all goods imported from Denmark, Finland, France, Germany, the Netherlands, Norway, Sweden and the United Kingdom from February 1, 2026.

The White House has stated these tariffs will rise to 25% on June 1 if no agreement is reached on Greenland.

Officials described the measures as necessary for national security, citing Greenland’s strategic Arctic position and its extensive mineral resources.

European leaders responded swiftly and in unison.

In a rare joint statement, the affected countries reaffirmed their support for Denmark and made clear that Greenland is not for sale.

Danish Prime Minister Mette Frederiksen said Europe would not be blackmailed, while French President Emmanuel Macron reportedly urged the EU to activate its Anti-Coercion Instrument.

That mechanism could allow the EU to impose retaliatory tariffs on up to €93 billion of US imports.

European officials attending the World Economic Forum in Davos have stressed diplomacy remains the priority, but ratification of a major US-EU trade agreement signed last year has already been halted.

Markets responded by rotating into safe-haven assets.

Gold and silver surged to fresh record highs, reflecting heightened demand for protection against geopolitical risk.

The euro and pound initially weakened against the dollar on concerns over European export exposure, but those moves faded as the dollar itself came under broader pressure.

Some analysts now warn of a longer-term risk of a “sell America” trade if the dispute deepens and the US becomes increasingly isolated.

Domestically, the administration faces mounting criticism and possible legal challenges.

Opponents argue that using the International Emergency Economic Powers Act to force territorial acquisition exceeds executive authority.

The issue takes on added significance as the US Supreme Court is expected to rule soon on the legality of tariffs imposed under the same legislation.

A decision could come as early as Tuesday and may determine whether the Greenland tariffs are enforceable at all.

As ING note,

“The announced tariffs will probably fall under the International Emergency Economic Powers Act tariffs that are currently subject to a forthcoming ruling by the US Supreme Court.

If the Supreme Court rules against earlier IEEPA tariffs, Trump’s latest announcement would be void and alternative measures would take time to implement.”

Markets view a ruling against tariffs as a potential positive, though the near-term disruption could still be significant.

Even in that scenario, investors remain wary that alternative routes to impose tariffs could be pursued, meaning trade tensions may not disappear any time soon.