Washington’s threat of tariffs on eight European nations to secure Greenland has heightened transatlantic tensions, with France pushing for the EU’s anti-coercion measures. Amid Greenland drama and Fed chair speculation, the dollar faces limited upside near 99.35, with a mild correction toward 98.80–98.85 likely, ING's FX analyst Chris Turner notes.

DXY faces resistance amid Fed chair speculation

"The weekend saw Washington up the ante in its pursuit of Greenland. The threat of 10% rising to 25% tariffs on eight European nations looks part of Washington's 'maximum pressure' playbook to secure a deal. Many political commentators are writing that this will prompt the end of the EU's appeasement policy towards the US. France seems to be at the forefront of recommending the use of the EU's Anti-Coercion Instrument – a trade tool targeting taxes, tariffs and investment limits on countries trying to coerce the EU."

"This topic and the threat of a NATO split look set to dominate the policy agenda in a week which otherwise would have seen heavy focus on Ukraine. US President Donald Trump is due to speak at Davos on Wednesday, while EU leaders are set to meet a day later. The question will be whether European leaders will follow China's playbook from last year – matching US tariffs one-for-one – to ultimately prompt a Washington climb-down."

"Away from Greenland, this week could possibly see President Trump announce his pick to replace Jerome Powell as Federal Reserve Chair. The dollar rallied on Friday when it emerged that the President wanted Kevin Hassett to stay at the National Economic Council, and Kevin Warsh is now seen as the frontrunner – a mild dollar positive if confirmed. Expect US data to take a back seat to politics this week, and expect the dollar to try exploring the downside. Gap resistance at 99.35 might now limit the topside for DXY, and a correction back to the 98.80/85 area is the mild bias."