By Michael O’Neill

The US dollar has had a tense week, and it fell against all the major currencies. It was a Trump-inflicted wound which had its origin in a perceived snub by the Nobel Prize committee. The Norwegian-based group awarded its most prestigious medal, the Nobel Peace Prize, to Maria Corina Machado of Venezuela on October 10 and Trump wanted it badly. After all, Barack Obama has one.

Trump has long lusted after Greenland and reportedly asked advisers about buying it in the summer of 2019. He revisited the issue after his 2025 inauguration, and since that day repeatedly increased threats including reportedly asking his military advisers to draw up plans for an invasion. In December, he called it “the Greenland crisis” and in the past few weeks said that NATO should give up the country as it was vital to US national security issues.

World leaders became alarmed and they organized Operation Arctic Endurance, a multinational military training exercise in Greenland to show solidarity in opposing Trump’s plans. Denmark, Norway, Sweden, France, Germany, the UK, the Netherlands, and Finland eagerly participated. Trump became irate and promised 10% tariffs on all imports from those countries beginning February 1 and that they would increase to 25% by June.

But he wasn’t done. In addition to the Greenland drama, he ordered the Justice Department to subpoena Fed Chair Jerome Powell for apparently lying to Congress about Fed building renovation cost overruns.

The “Sell America” trade was reborn.

Global financial markets feared the double whammy of Fed independence being usurped by the White House and NATO being fractured or dissolved. NATO and the entire United Nations became a more pronounced worry after Trump announced his “Board of Peace” and invited leaders to pony up $1.0 billion for a seat.

As usual, traders voted with their wallets. In the past week, the S&P gave up all of its 2026 gains and dropped into negative territory. The cost of borrowing rose after the US 10-year yield soared from 4.12% last Thursday to 4.30% today, although Japanese bond activity also played a role. Risk aversion drove gold (XAUUSD) from 4554.00 on Friday to 4888.13 today. Surging gold prices helped propel commodity currencies higher although Canada’s proximity to America meant the Loonie lagged Aussie and Kiwi gains.

Dialing Down the Drama

Trump’s keynote address at Davos was the hottest ticket in town today and the former reality-show host did not disappoint. The speech was classic Trump, long-winded and littered with selective truth, aggressive spin, and outright fantasy.

However,  he threw a bone to financial markets when he ruled out using force to take over Greenland, although he wasn’t graceful in the concession. He said Denmark was “ungrateful” and then said Greenland was merely a piece of ice before claiming that only the US was in any position to secure the country.

Global equity traders liked what they heard and started buying. Many European indexes recouped most of their losses but are likely to close on a mixed note. Wall Street is rallying with the S&P 500 gaining 0.97% while profit-taking knocked gold down to 4838.41. The major G-10 currencies are giving back some gains, but the Canadian dollar remains rather robust. The lack of a more robust response may be evidence that traders are used to Trump’s flip-flops. They probably believe Trump will revisit using the military at some time soon, especially if Denmark does not acquiesce to his demand for “immediate negotiations.”

Back to Basics

Traders are turning their attention to Governor Lisa Cook’s Supreme Court hearing as to whether Trump has the power to fire a Governor. The Wall Street Journal is suggesting that so far, the White House may be on shaky ground. Apparently Chief Justice John Roberts was skeptical of one of Trump’s solicitors who accused Ms. Cook of committing deceit in mortgage paperwork. The WSJ wrote that the Chief Justice “asked whether it made a difference ‘whether this was an inadvertent mistake’ or whether it was a ‘devious way to get a better interest rate.’”

Fed Chair Jerome Powell is reportedly sitting in the audience and that comment had to put a smile on his face. Powell has been subpoenaed by the Justice Department in a move that seems to have been designed by Trump to seek retribution for Powell’s refusal to cut interest rates when demanded.

Today’s events tell markets and policymakers that they need to separate signal from noise, and Davos was the latter.