By: Daniela Hathorn Senior Market Analyst – Capital.com
President Trump’s statement at the World Economic Forum in Davos that the United States will not use military force to acquire Greenland has had a noticeable calming effect on markets today. US equities rebounded after earlier weakness, with the Dow and broader indices moving higher as Treasury yields eased and the US dollar stabilised following earlier declines. This suggests that investors welcomed the removal of a tail risk associated with unpredictable geopolitical escalation.
The move helped reverse some of the sharp selloffs seen earlier in the week when Trump’s prior rhetoric (including tariffs and possible forceful acquisition of Greenland) sparked fear of a deeper rift with NATO allies and broader geopolitical instability. That episode had weighed on sentiment and contributed to markets’ worst losses since October as investors sought clarity.
By publicly ruling out military intervention, the statement removed one of the least credible but most destabilizing scenarios markets had been contemplating, helping to reduce risk premia and restore a bit of calm to asset prices.
Before the clarification, the US dollar weakened as traders began to price in geopolitical instability emanating from the US itself, a relatively unusual driver. Alternative safe havens such as the Japanese yen, Swiss franc and gold strengthened on that narrative. With the force-off-the-table comment, some of that safe-haven bid has unwound, at least temporarily.
US Dollar index (DXY) daily chart:
Broader Implications for Sentiment
While Trump did rule out military force, he has not abandoned his interest in negotiating over Greenland or strategic cooperation, and the broader diplomatic episode is still unresolved. European leaders and NATO allies remain cautious, and the underlying geopolitical tensions have not disappeared, they’ve merely been reprieved for now.
From a market’s perspective, clarity matters more than outcome in the short run. Removing the most extreme scenario has helped equities and risk assets recover, at least in the near term. But ongoing uncertainty around trade relationships, NATO cohesion, Arctic strategy and US–EU diplomatic dynamics means that sentiment remains sensitive to headlines and could be volatile if new twists emerge.
