Euro and Swedish krona may see gains, even though euro-zone data is limited and the European Central Bank (ECB) is quiet. If worries about the Federal Reserve ease, the EUR/USD could climb to 1.16, or even reach 1.1750, but uncertainty about Greenland is still a concern. The Swiss Franc is currently the strongest G10 currency, acting as a safety net against risks to the Federal Reserve’s independence. Predictions for 2025 show that both the euro and Swedish krona may gain. The markets are cautious as they wait for clarity on the implications of recent Federal Reserve subpoenas. A significant risk for European currencies is the possible US annexation of Greenland, which may affect market liquidity. There is also unusual activity in Danish krone forwards, indicating ongoing hedging or speculation. This week, we expect very little domestic data for the euro, and few ECB officials are set to speak. Markets seem hesitant to change their views on ECB pricing. If the risks from the Federal Reserve lessen, EUR/USD could hit 1.1600, but clarity is important. A bullish target of 1.170-1.1750 is expected in the short term. Looking at movements in 2025, both the euro and Swedish krona are likely to gain if fears about the Fed’s independence continue to fade. The Fed Policy Uncertainty Index has decreased by 15% in early January, suggesting the market is discounting worst-case scenarios from last year’s subpoenas. This situation supports a potential rise in EUR/USD toward 1.1600 soon. The main risk for European currencies remains the US’s threat over Greenland, keeping geopolitical risks high. This is reflected in unusual activity in Danish krone forwards, where 3-month hedging costs have surged to heights not seen since the 2015 currency crisis in Europe. Recent satellite images showing US naval deployments in the North Atlantic underline the importance of taking this risk seriously. With little data from the Eurozone this week and a quiet ECB, the focus stays on external factors. Traders might want to consider buying near-term EUR/USD call options to benefit from a potential reduction in Fed tensions. A rise toward our target of 1.1700-1.1750 could offer substantial rewards, especially if the market gets reassurance from Washington. The Swiss Franc has again shown its strength as a protective measure against political and geopolitical issues, outperforming all G10 currencies this month. Similar to what we saw during the European sovereign debt crisis over a decade ago, capital tends to flow into CHF when regional stress arises. Traders with bullish euro positions should think about using CHF call options as a direct hedge against any escalation related to Greenland.

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