US President Donald Trump on Wednesday withdrew his threat to impose tariffs on several countries over their stance on Greenland, saying he had reached a broad agreement with NATO on the future of the island.
At 9.30 am, the US Dollar Index (DXY) was at 98.769 points, stable since it opened in early trading on Thursday in the Asian session.
The market did not rise due to clarity on the US’s ultimate goal in Greenland, but was instead driven by reduced uncertainty.
The signals conveyed by US President Donald Trump from Davos were seen as more of a coordination approach than a confrontation, thus easing market concerns.
The withdrawal of the tariff threat in the short term, along with the formation of a negotiating framework with NATO regarding Greenland, signal that the issue has moved from a major geopolitical risk to a negotiation phase.
This development reduces the likelihood of sudden policy shocks and supports sentiment towards risk assets.
Historically, markets have tended to be more comfortable with negotiation risk than policy uncertainty. This pattern is consistent with previous strategies that have seen aggressive stances used to gain leverage before moving to more structured agreement formation.
When trade risks or geopolitical escalations are mitigated, markets typically respond positively.
The announcement that tariffs will not be implemented on February 1, along with indications that a framework for a future agreement exists, has sparked market gains.
Investors had previously been concerned about developments in Greenland and tariff proposals, including concerns about the possibility of military action, which have now been dismissed.
Meanwhile, market attention is also focused on key US economic data releases, including the final third-quarter Gross Domestic Product reading, initial jobless claims and Personal Consumption Expenditures data due later Thursday.
Weaker-than-expected data could put pressure on the US dollar and support dollar-denominated commodity prices.
