The euro advanced against the U.S. dollar in foreign exchange markets as renewed geopolitical tensions surrounding U.S. interest in Greenland weighed heavily on dollar sentiment and pushed investors toward the single currency.
The EUR/USD pair climbed to around $1.162, rebounding from a three-month low near $1.158, as broad-based dollar weakness provided support. Market participants attributed the move to rising uncertainty following fresh tariff threats from U.S. President Donald Trump.
According to currency traders, the dollar came under pressure after President Trump warned of imposing tariffs on multiple European countries as part of an effort to compel Denmark to negotiate the sale of Greenland to the United States. The proposed measures reportedly include initial tariffs of 10 per cent starting February 1, with the potential to rise to 25 per cent by June 1 if no agreement is reached.
European governments are said to be considering retaliatory trade measures and wider economic counteractions in response to the threat of new U.S. export levies, further intensifying tensions between Washington and its European allies.
Analysts warned that any escalation could lead to trade diversion within the European Union, with countries such as Germany and the United Kingdom—both heavily exposed to U.S. export markets—likely to bear the brunt of the impact. Estimates suggest that a 10 per cent tariff could reduce GDP by approximately 0.1 per cent, while a 25 per cent levy could cut output by between 0.2 and 0.3 per cent.
While the euro benefited from the weakening dollar, gains were capped by concerns over the broader political and geopolitical implications of the Greenland dispute. Market analysts cautioned that any attempt by the U.S. to assert control over the territory could severely strain transatlantic relations and undermine NATO cohesion.
The euro had ended the previous week on a subdued note below $1.16 and briefly slipped under $1.1575 in early trading, marking its lowest level since late November. However, the currency recovered sharply as investors reassessed the dollar-negative implications of the unfolding developments.
The single currency briefly touched $1.1640 before losing momentum, with the pre-weekend high slightly above $1.1625. Technical analysts noted that a sustained close above that level would complete a bullish “outside day” pattern. Meanwhile, options linked to €2.1 billion at a strike price of $1.1585 were set to expire later in the session.
