Trade War Drums: USD Slides as Davos Leaders Rebuke Trump's 'Greenland Ambitions'

The US Dollar faces renewed selling pressure this session as a diplomatic firestorm engulfs the World Economic Forum in Davos. The greenback's retreat coincides with an extended rally in the Canadian Dollar (CAD), driven by escalating tensions between the White House and European allies over President Trump's controversial push to acquire Greenland.

A Trans-Atlantic Rupture

The prospect of a renewed trade war has rattled risk sentiment. In a coordinated pushback, European leaders have labeled the US administration's territorial overtures as “imperial ambition.”

European Commission President Ursula von der Leyen issued a stark rejection of the acquisition proposals, stating that the sovereignty of Greenland—and by extension Denmark—is “non-negotiable.” This stance was reinforced by French President Emmanuel Macron, who warned that the EU would not hesitate to deploy anti-coercion instruments (ACI) if Washington leverages tariffs as a forceful negotiation tactic.

“We are moving into a world without rules... The accumulation of new tariffs is fundamentally unacceptable, especially when used as leverage against territorial sovereignty,” Macron warned attendees.

Market Impact: CAD Gains, EUR Nervous

• CAD/USD: The Loonie has secured a second consecutive session of gains. Traders appear to be pricing in a strategic premium for Canada, given Prime Minister Justin Trudeaus firm alignment with Denmark and NATO Article 5 commitments, alongside rumors of Canadian military exercises in the region.
• EUR/USD: While the Euro is holding ground, upside is capped by fears of punitive US tariffs. Trump has hinted at 200% levies on French goods, creating a binary risk environment for the single currency.

'No longer Diplomacy'

California Governor Gavin Newsom, also present at Davos, characterized the European negotiation attempts as futile, urging the bloc to “stiffen its spine.” The lack of diplomatic cohesion suggests that the G7 structure may be fracturing, a sentiment underscored by Trump's refusal to attend a proposed emergency summit in Paris.

With the US President characterizing the Greenland acquisition as a “done deal” on social media, volatility is expected to persist across Atlantic trading pairs as markets gauge the probability of new tariffs or sanctions.