Risk Rally: Trump Withdraws Tariff Threat Following 'Greenland Framework' Breakthrough

Global markets breathed a collective sigh of relief on Wednesday after U.S. President Donald Trump announced the suspension of tariffs scheduled for February 1, citing a breakthrough “framework agreement” with NATO and Denmark regarding Greenland. The geopolitical pivot has triggered an immediate unwind of safe-haven positions, boosting risk assets and high-beta currencies while pressuring Gold.

Tariff De-escalation Fuels Risk-On Flows

The cancellation of the threat to levy tariffs on European goods removes a significant short-term headwind for the global economy. In reaction, the Euro (EUR) stabilized, while the Australian Dollar (AUD) and New Zealand Dollar (NZD) surged, with the Aussie hitting 15-month highs supported additionally by strong domestic labor data. Conversely, Gold (XAU/USD), which had rallied on trade war fears, faced heavy selling pressure, retreating from recent highs as the “political risk premium” evaporated.

Trump stated on social media that the agreement involves a permanent framework for Arctic cooperation and U.S. mineral rights participation, though he ruled out a military takeover. Sources suggest the deal involves sovereign land swaps for expanded U.S. military base operations—a strategic move reminiscent of British bases in Cyprus.

Key Market Data

• Suspension Date: February 1
• Australian Dollar: Hitting 15-month highs
• Trade Recommendation: Long AUD/USD, Short USD/CHF

Market Analysis: The “Trump Put” in Geopolitics

This episode highlights the volatile “transactional” nature of the current administration's trade policy. Markets are likely to price in a “Trump Put”—the expectation that extreme threats (like 25% auto tariffs) are negotiating tactics rather than final policy.

However, while the immediate tariff threat has receded, the mechanism of using trade levies as leverage for geopolitical territorial concessions sets a new precedent. Forex traders should remain wary; while the short-term signal is bullish for risk (Long AUD/USD, Short USD/CHF), structural trade tensions between the U.S. and the EU remain unresolved on broader industrial fronts.