Will Europe retaliate?
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How might Europe retaliate to President Trump's Greenland threat?
As President Trump continues his pursuit of Greenland with the terror threats on Europe, how will Europe retaliate? Maybe things will de-escalate at Davos. Although if you remember last year, uh Donald Trump's video addressed to the World Economic Forum was very anti EU. So are we gonna see a trade war emerge or is it all a storm and a teacup? It's Tuesday, it's the twentieth of January twenty twenty-six. It's the morning call from NAB. Good morning. Well the US dollar is down a third of one percent, the Aussie up half a percent, a little over sixty seven point one US cents now. The pound and the euro up about no point four percent, but no movement in the yen. US equity markets were closed, of course, uh but falls in Europe overnight.
The Euro stocks fifty is down one point seven percent, the CAC current down one point eight percent. Very little movement in bond yields, n in the US of course, because the bond markets were also closed, but yields are down on future. But Japanese 10 years did rise eight basis points yesterday. Aussie yields are rising too, up for 4.74% yesterday, and up another five basis points this morning on futures. The biggest moves have been in precious metals. That's how markets are responding to the Greenland story. Silver hit a new high, up 6.6%, gold up 1.7%, also hitting a good R high, whilst Bitcoin. Uh fell about three point three percent. Uh Nabs Reatril is with me in Sydney this morning, so a weaker dollar, more expensive gold and silver.
Um this is uh all just coming out of the the the Greenland crisis, presumably.
Yep, morning Phil.
What are the early market reactions to the Greenland crisis (FX, equities, bonds)?
Definitely is uh the weekend news obviously of uh President Trump's threat to impose uh a ten percent tariff on the eight European countries, which includes the UK, who have um uh been threatening or um yeah, moving down the road of doing military um operations in Greenland has inflamed President Trump's sensibilities. So incidentally has said that the main reason he wants to take over Greenland is his displeasure at Norway not granting him the Nobel Peace Prize. So
He says he no longer he n no longer needs to be completely uh associated with peace is is what he said, because he didn't get the Peace Prize. Yeah. That's what we're dealing with. with
Me and my uh FX strategy partner in crime Rodrigo in our travels around uh the the world presenting in the last year talk about this thing called the Overton window, which is a a concept about the range of policy options that are acceptable in sort of dinner party conversations for discourse. And I don't think if you'd mentioned uh the President taking over Greenland on such a pretense would have uh would have made one of the tail risks in terms of that spread. But um but here we are. But yes, we had a you know a pretty strong risk-off reaction. But it's interesting that the the very sort of knee-jerk reaction that we had, which was the dollar down as well as sort of equity futures lower, um did reverse uh fairly all fairly early on yesterday morning, and we've ended up with the whiff of a of a sort of sell America theme coming back with equities down, the dollar actually reversing, and uh obviously bond markets have
Have been closed, although ten-year Treasury note futures I think are slightly weaker for choice. And I think one of the reasons for that was a narrative that started doing the rounds quite early on in the morning. I think one of the European investment banks had put out a note on the weekend suggesting that Europe might decide to weaponize capital flows in response to Trump going ahead with that tariff threat if indeed he does follow through with that. Which is some No mean feat. Most of the um US assets, whether it's equities or bonds that are owned by European investors, are owned by the private sector. So um it's not something that could easily be mobilised. But uh certainly caught the market's imagination and seemed to be responsible for a a bit of a rebound in the euro in particular and uh as a weakness in the US dollar which has persisted through the European session.
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Chapters
8 chapters
1
How might Europe retaliate to President Trump's Greenland threat?
0:01–1:34
2
What are the early market reactions to the Greenland crisis (FX, equities, bonds)?
1:34–4:13
3
What anti‑coercion powers could the EU invoke against a US tariff on Europe?
4:13–6:11
4
How are inflation trends in Canada and the Eurozone shaping market sentiment?
6:11–8:23
5
What does the latest Chinese economic data reveal about growth and export strength?
8:23–10:12
6
How could Japan's upcoming election and a possible consumption‑tax holiday affect the yen and CPI?
10:12–13:00
7
What does the UK labor‑market report indicate for BoE rate‑cut expectations?
13:00–14:25
8
Which geopolitical events at Davos and the US Supreme Court could move markets today?
14:25–15:35