Barclays strategists believe that if the relationship between the European Union and the United States deteriorates severely, leading to a U.S. withdrawal from NATO, then tensions over Greenland would represent a far greater problem for the euro than for the dollar.
In a report, Barclays FX strategists including Lefteris Farmakis stated, "The worst-case scenario could be a complete rupture in the relationship between the United States and its NATO partners."
They suggested that a potential U.S. exit from the alliance "should impart a negative premium on the euro."
These strategists downplayed the view that European investors' holdings of U.S. assets serve as a significant counterbalance to American geopolitical power.
They noted, "Although the eurozone has indeed increased its exposure to U.S. assets since the beginning of the last decade, it has also received substantial capital inflows from the rest of the world."
They added, for instance, that in a world where EU-U.S. relations have reached a breaking point, one cannot assume that Asian investors' preference for European bonds would remain unchanged.
They also pointed out that over the past year, a large-scale "sell-off" of U.S. assets by major holders, in response to U.S. tariffs, has not materialized so far.
These strategists argue that, for now, the dollar is vulnerable to the impact of Trump's latest threats, which could trigger a reversal of the long dollar positions established earlier in the year.
They stated that the safe-haven Swiss franc remains "the best tool to hedge intra-NATO discord," and added that a further rise in the VIX index could negatively impact more risk-sensitive currencies, such as the Swedish krona, Australian dollar, Latin American currencies, and the South African rand.
