USD: Tariff threats over Greenland weigh on US Dollar – Scotiabank

FXStreetJan 19, 2026 2:37 PM

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Renewed tariff threats from February on certain European countries in response to their opposition to President Trump’s desire to acquire Greenland mark a further deterioration in the western alliance and global geo-political environment. Financial markets have responded by nudging the US Dollar (USD) a little lower and selling US assets, with US equity and Treasury futures weaker, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

USD softens as markets react to geopolitical strains

"SCOTUS has scheduled another opinion day for Tuesday (around 10ET). This may be the last chance for the court to issue an opinion on President Trump’s IEEPA tariffs for a few weeks at least. US officials have made it clear that in the event the court rules against the White House, alternative tariff measures will be implemented quickly but a legal challenge to tariffs linked to the Greenland situation could also face a legal challenge. Note that the court will also hear arguments Wednesday in the case regarding the administration’s attempt to fire Fed Governor Cook."

"The USD firmed modestly on reports Friday suggesting that President Trump was keen to keep Kevin Hassett in his current position, rather than selecting him as his nomination to replace Fed Chair Powell but the risk of an erosion in the Fed’s policy autonomy represents another potential challenge for the USD in the weeks ahead. Steady gains in the CNY—which has risen for eight consecutive weeks since breaking below 7.10 in late Nov—also represent a drag on the USD’s broader performance."

"DXY gains extended a little further than we expected last week but resistance in the 99.50 appears to be firming up as broader dollar momentum softens. We remain bearish on the USD outlook. The federal government holiday in the US for MLK Day may keep US market reaction to developments somewhat subdued today."

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