US Dollar Under Pressure As Geopolitical Risks Mount Over Greenland, Ukraine And Policy Uncertainty

by Stefan J. Bos, Worthy News Chief International Correspondent

NEW YORK/LONDON/BUDAPEST (Worthy News) – The U.S. dollar is coming under pressure in the early weeks of 2026 as investors reassess long-held assumptions about the stability of the world’s dominant currency amid rising geopolitical tensions and economic uncertainty, financial markets and analysts say.

The dollar has slid sharply against a basket of major currencies, logging its largest three-day decline since April 2025, according to market data.

The euro and the British pound hit more than four-year highs against the U.S. dollar on Tuesday, as improving investor sentiment toward Europe and Britain combined with fears of further weakness in the greenback.

The euro rose as much as 0.8 percent to about $1.197, its highest level since June 2021. Sterling also climbed 0.8 percent to around $1.379, its strongest level since October 2021, before paring some gains.

Better-than-expected economic data from Germany and easing concerns over fiscal risks in France helped lift the euro, while sterling also gained support from improving British economic indicators.

EUROPEAN DATA AND US POLICY JITTERS

The brighter signs from Europe coincided with a sharp sell-off in the dollar over the past week, triggered in part by investor jitters over what analysts describe remembered as erratic U.S. policymaking.

Dollar-weary investors cite uncertainty around Washington’s policy direction — including tariff threats and geopolitical disputes — as prompting a broader rethink among global asset managers and currency strategists.

Another major factor weighing on the greenback is shifting expectations about U.S. interest rates set by the Federal Reserve, America’s central bank, which influences borrowing costs globally through its control of benchmark rates.

Markets have increasingly priced in the possibility that the Fed could begin cutting interest rates later in 2026 to support economic growth.

Lower interest rates generally reduce returns on dollar-denominated assets, often making the U.S. dollar less attractive than other major currencies.

DOLLAR SLIDE AMID SAFE-HAVEN FLOWS

Market indicators show the dollar’s trade-weighted index has weakened by roughly 5 percent over the past year, while rivals such as the euro and British pound have gained ground as investors diversify away from U.S. assets.

In parallel, precious metals such as gold and silver have surged toward record prices, reflecting a search for traditional safe-haven assets amid heightened uncertainty.

Financial commentators have also pointed to the revival of the so-called “Sell America” trade, in which global investors reduce exposure to U.S. equities, bonds, and the dollar amid fears of policy unpredictability.

One key source of market unease has been renewed friction between Washington and its European allies over Greenland, after U.S. President Donald J. Trump again suggested the United States should assert stronger control over the strategically located Arctic territory.

Denmark and Greenlandic leaders have firmly rejected such ideas, while NATO, the Western military alliance, has warned that tensions in the Arctic could strain Western unity at a time of rising global security threats.

WAR IN UKRAINE SHAPES SENTIMENT

Additionally, the ongoing war in Ukraine — now in its fourth year — continues to shape investor confidence, analysts say. Markets remain sensitive to battlefield escalations, Western sanctions on Russia, and broader concerns over energy security and supply chains tied to Eastern Europe, according to a Worthy News analysis.

Experts say the conflict remains a persistent driver of volatility, encouraging investors to shift funds into alternative currencies and safe-haven assets.

Economists note that while the dollar remains the world’s primary reserve currency, its dominance could face gradual pressure if geopolitical instability and policy uncertainty encourage greater diversification.

“We saw in the past few days that if there is some flight away from the dollar, the euro is definitely up there to benefit from it,” said Francesco Pesole, a foreign-exchange (FX) strategist — meaning a currency-market analyst — at ING, a major Dutch multinational banking and financial services group.

Pesole added that President Trump’s “unpredictable” policy posture, including over Greenland, had reignited what he called the “Sell America” theme in global markets.

For now, strategists say markets are entering a period in which both economic policy signals from Washington and global flashpoints — from Ukraine to the Arctic — are likely to play an outsized role in determining the dollar’s direction through 2026.

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