US President Donald Trump plans to impose a 10% tariff on goods from Denmark, Sweden, France, Germany, the Netherlands, Finland, Britain, and Norway. This decision is in response to these countries rejecting his proposal to acquire Greenland. In reaction, EU ambassadors are working hard to stop these tariffs from happening. At the same time, they are preparing their own plans if the US goes ahead with them.

Impact on the Euro and Stock Markets

The EUR/USD exchange rate has risen by 0.22%, now at 1.1624. Tariffs are taxes on imported goods that help local businesses compete. They are different from the taxes consumers pay at the store or other taxes. Trump wants to use tariffs to boost the US economy during his presidential campaign, focusing on Mexico, China, and Canada. The money collected from these tariffs is meant to reduce personal income taxes and support local businesses against foreign imports. The February 1 deadline for new tariffs on Europe is causing a lot of uncertainty. Many are turning to safer investments, driving gold prices to record highs over $4,650 an ounce. Traders should expect volatility to remain high as this date approaches. European stock indices, especially Germany’s DAX, are most at risk from this geopolitical issue. The targeted countries exported over $450 billion in goods to the US in 2025, meaning tariffs could significantly affect corporate profits. Buying put options on these indices is a smart move for protection against market drops.

Strategy Against Market Uncertainty

In the currency market, we expect the Euro and Pound Sterling to weaken further against safe-haven currencies like the Japanese Yen and Swiss Franc. The implied volatility on EUR/USD put options has increased, indicating that traders are bracing for a possible drop below the 1.1500 level. Holding long positions in the Yen and Franc can be a good way to hedge against risks. While the focus is on Europe, this situation will likely affect US markets as well, hitting multinational companies facing retaliatory tariffs. The VIX, which measures market fear, jumped over 35% last week, trading above 28, a level not seen since the banking issues of 2025. Similar trade disputes from 2018-2019 led to significant market corrections. The rise in gold prices is expected to continue as long as geopolitical tensions drive the market, hinting at further gains for gold futures and related call options. However, an escalating trade war could hurt global growth forecasts, potentially lowering demand for crude oil. This could lead to weakness in WTI prices, which are currently struggling to stay above $58. Create your live VT Markets account and start trading now.

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