Washington’s threat to impose tariffs on eight European countries to secure Greenland has exacerbated trans-Atlantic tensions, with France pressing for EU anti-coercion measures. Amid the Greenland drama and Fed chief speculation, the dollar faces limited upside near 99.35, with the potential for a slight correction towards 98.80-98.85, notes Chris Turner, FX analyst at ING.
DXY Index faces resistance amid Fed Chairman’s speculation
“The weekend saw Washington escalate its stance in its bid to seize control of Greenland. The threat of tariff hikes of 10% to 25% on eight European countries appears to be part of Washington’s ‘maximum pressure’ playbook to secure a deal. Many political commentators write that this will end the EU’s policy of appeasement towards the US. France appears to be at the forefront of recommending the use of the EU’s anti-coercion tool – a trade tool targeting taxes and tariffs. Customs and investment restrictions on countries trying to force the European Union.
“This topic and the threat of a NATO split looks set to dominate the policy agenda in a week that would have seen a heavy focus on Ukraine. US President Donald Trump is scheduled to speak in Davos on Wednesday, while EU leaders are scheduled to meet the next day. The question is whether European leaders will follow the playbook China has been playing for the past year – matching US tariffs one by one – to eventually push Washington back.”
“Away from Greenland, this week could see President Trump announce his pick to replace Jerome Powell as Fed Chairman. The dollar rose on Friday when it emerged that the president wants Kevin Hassett to remain on the National Economic Council, and Kevin Warsh is now seen as the front-runner – a slight positive sign for the dollar if confirmed. We expect US data to take a back seat to policy this week, and expect the dollar to try to explore the downside. Gap resistance at 99.35 may now limit the upside.” DXY, correction to 98.80/85 area is moderate bias.”
