Facing Trump's pressure on Europe regarding Greenland negotiations through tariffs, the EU's potential countermeasure "trump card" may lie in financial markets rather than trade sanctions. France has urged the activation of an "anti-coercion instrument," directly targeting U.S. foreign investment, finance, and trade sectors.
Capital Economics points out that tariffs of 10%-25% would impact NATO economies' GDP by only 0.1-0.3 percentage points and raise U.S. inflation by 0.1-0.2 percentage points, but the political consequences far exceed the economic ones—forcibly taking the island could severely damage NATO. The current deadlock is that Europe firmly adheres to the sovereignty red line over Greenland, while the U.S. refuses to concede.
Deutsche Bank's Head of FX Research, George Saravelos, reveals America's soft spot: Europe holds $8 trillion in U.S. bonds and stocks (nearly the total of the rest of the world combined), making it the largest "creditor" to the U.S., helping to balance its external deficit. If Western geo-economic stability is threatened, Europe might accelerate a "sell America" strategy—Denmark's pension fund has already taken the lead in reducing its dollar exposure.
He predicts that the euro and Danish krone will be minimally affected by tariffs, as Europe's political cohesion is instead strengthened by Trump's pressure. With the U.S. midterm elections approaching and price pressures mounting, Europe could directly push up U.S. borrowing costs by influencing inflation expectations and U.S. Treasury yields. Given the U.S. net international investment position is at a record negative value and U.S.-Europe finance is highly intertwined, the "weaponization of capital" holds far more destructive power for markets than trade.
Rising geopolitical risks are boosting safe-haven demand; gold opened higher today, breaking through $4650. Technically, filling the gap is key. Currently, the 15-minute MA20 is at 4643.8, and the 30-minute moving averages have formed a bullish alignment near 4616, indicating strong short-term upward momentum. The $4650 level has shifted from resistance to support; combined with last week's resistance at 4634, today's core support levels are seen at 4634 and 4643.8, while resistance levels to watch are 4699 and 4718.
