Euro-to-Dollar Week Ahead Forecast: The Greenland Trade
- Written by: Gary Howes
Official White House Photo by Daniel Torok
The euro was the initial winner of renewed threats of U.S. tariffs.
We saw it time and again in 2025: the U.S. announces a fresh tariff initiative and the dollar falls and the euro gains.
Indeed, the first half of 2025 confirmed that the euro was the main beneficiary of 'sell America' action in FX markets. This theme holds true today, even if it's Europe that is at the receiving end of Trump's threatened tariffs.
The euro to dollar exchange rate rose to 1.1640 - and kissed the descending nine-day exponential moving average (EMA) - as investors took account of Trump's threat to impose a 10% import tariff on EU goods.
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The U.S. President is not happy that EU nations and the UK are not going to allow him to buy Greenland against Denmark's will.
The dollar tends to lose when tariffs are bandied about, as they are a tax on U.S. consumers and ultimately dent U.S. economic performance potential.
However, there are a few important points to note concerning the euro-dollar at this juncture:
1) Technically, the exchange rate is still descending and there's not enough of a market reaction on Monday to snap the downtrend. As mentioned, then pair kissed the nine-day EMA and then fell back. While below here, the near-term outlook is lower.
2) Traders aren't ready to pursue another 'Sell America' trade. There's simply too much uncertainty and anyone with a memory that goes back a couple of months will remember the TACO trade - Trump Always Chickens Out.
In short, the worst doesn't materialise.
3) A Supreme Court ruling over the legality of Trump's use of tariffs is imminent. Polymarket shows 'the money' sees a 70% chance Trump is defeated. If that happens, then what? From the market's perspective, there's a risk that the 'sell America' premium is unwound and the dollar surges.
So although the euro starts the new week with a bid, we wouldn't be surprised if it fades.
🔥 There's a big caveat though: Trump appears determined to get Greenland, and recent events in Venezuela prove he is ready to act militarily in 'his' hemisphere. He's also clearly seeking a legacy, and expanding the American map delivers that.
We could be entering truly uncharted waters from a geopolitical perspective. So this could be a very news-driven week with numerous twists and turns.
