Pound to Dollar Week Ahead: Greenland Tensions Set the Tone

Image: Photo by Anthony Quintano. Licensing: CC 2.0. Sourced: Flickr.

The British pound starts the new week with a bid owing to U.S. tariff threats over Greenland.

The dollar is under pressure at the start of the new week as markets react to the prospect of significant new tariffs being levied on America's main trading partners.

U.S. President Donald Trump said on the weekend he will be imposing tariffs of 10% on the EU and UK starting February 01 over their resistance to his efforts to secure Greenland for the U.S. They would ratchet to 25% if no agreement is reached by June.

"Investors sought alternative safe havens to the USD," says Samara Hammoud, FX analyst at Commonwealth Bank.

The threat of tariffs reignites the 'sell America' trade: a trade we grew familiar with in 2025 as U.S. global hegemony and economic outperformance was threatened by Trump's inward-looking policy actions, spearheaded by tariffs.

Tariffs are a tax on U.S. consumers, and the market's judgment is that they pose downside risks to growth, thereby limiting economic exceptionalism.

So we start 2026 where we started 2025: with the U.S. rattling the tariff sabre and the dollar struggling.

The pound to dollar exchange rate initially fell to 1.3338 in Monday's Asian trade before climbing back to 1.3405, building a daily gain to 0.22%.

🔎 GBP/USD outlook

Technically speaking, Monday's advance doesn't really do enough to shift the outlook for the pound-dollar: the pair remains caught in a near-term downtrend, in place since January 06.

The pair is yet to break above the nine-day exponential moving average, at 1.3417, which it must do in order to shift the immediate outlook from down to up.

Also, investors are conscious that Trump's plans could be about to come unstuck owing to an imminent ruling of the U.S. Supreme Court on the legality of his use of tariffs.

Polymarket shows the odds of the Supreme Court ruling against Trump are at 70%, and Polymarket is usually on the money.

Perhaps if it weren't for this imminent ruling, the dollar would be a lot weaker. The ruling is due any day now and provides a reason to keep emotions in check.

Given this, GBP/USD still looks heavy here and a test of the 200-day exponential moving average at 1.33 is favoured ahead of a resumption of the upside in later weeks.

🔥 It's a busy week in the UK datawise, and we point readers to our UK Week Ahead assessment, detailing why we think the upcoming labour and inflation market data could bolster the pound.