Investors jittery as Trump threatens more tariffs on Europe
The U.S. dollar weakened on Monday as investors grew increasingly cautious following fresh tariff threats from President Donald Trump directed at European nations over the Greenland issue. The uncertainty prompted a shift toward traditional safe-haven currencies, with both the Japanese yen and Swiss franc seeing strong demand in a risk-off move across global markets.
Over the weekend, Trump announced plans to introduce an extra 10% import tariff starting February 1 on goods from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland, and the United Kingdom. The tariffs would remain in place until the United States is granted approval to purchase Greenland.
In response, European Union ambassadors agreed on Sunday to intensify diplomatic efforts aimed at preventing the tariffs, while simultaneously preparing countermeasures should the proposed duties be implemented, according to EU officials.
After a brief dip during overnight trading, European currencies rebounded, with the euro, British pound, and Scandinavian currencies moving higher. Meanwhile, the Swiss franc—a traditional safe-haven—recorded its strongest daily advance against the U.S. dollar in nearly a month.
Euro Gains as Investors Shun the Dollar
The euro reversed early losses from the Asian session, rising 0.2% to $1.1627 by mid-morning in Europe. The pound also staged a modest recovery, gaining 0.1% to trade around $1.339.
While trade tensions would typically be expected to weigh on the euro, market dynamics have shifted. Khoon Goh, Head of Asia Research at ANZ, noted that recent episodes of heightened U.S. policy uncertainty have tended to pressure the dollar instead.
“Historically, tariff threats would suggest a weaker euro,” Goh said. “However, as seen during last year’s so-called ‘Liberation Day’ tariffs, foreign exchange markets have consistently reacted with dollar weakness whenever uncertainty rises from U.S. policy decisions.”
Investor confidence in the dollar took a hit last April after President Trump announced broad tariffs affecting global trade, prompting concerns over the stability of U.S. assets.
Although there were signs of capital flowing away from the dollar on Monday—particularly reflected in the strong performance of the Swiss franc—analysts cautioned that a sharper escalation in tensions could still drive investors back toward the U.S. currency.
Rabobank’s Chief Currency Strategist, Jane Foley, warned against assuming the dollar has lost its role as a safe haven altogether. She pointed out that, despite investor unease, alternative markets lack the scale to absorb large capital shifts.
“Even if international investors reduced their exposure, there are limited places for that capital to go,” Foley said. “The depth and size of U.S. financial markets ensure that American assets will continue to retain some safe-haven appeal.”
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