Actions follow threats

[Ben Graham]

The euro strengthened sharply against the US dollar yesterday after threats gave way to action. Talk that EU countries might begin shedding US government debt briefly remained talk.

It became known yesterday that Denmark has begun actively offloading US Treasuries. AkademikerPension announced the sale of US government bonds. The pension fund expects to sell roughly $100,000,000 of securities and to close the position by the end of January 2026.

The fund described the decision as purely financial — rising deficits and the trajectory of US government debt make Treasuries a suboptimal tool for managing risk and liquidity. An unofficial motive is the intensifying US–Europe dispute over tariff threats by Mr. Trump and his statements of claims on Greenland, which remains Danish territory.

Denmark's move, even if made by a relatively small pension fund, is a warning shot for the US economy. Investors worldwide watch actions by large players closely, and such steps could trigger a chain reaction. If other countries and funds follow Denmark's example, demand for US government bonds could fall sharply, pushing yields higher and raising the cost of servicing US public debt.

The official rationale for the Danish fund's decision is understandable. Uncertainty in the US economy, a growing sovereign debt burden, and political instability make US treasuries less attractive to investors seeking stability and safety. By contrast, the euro looks increasingly confident, especially against the backdrop of prospects for deeper economic integration inside the EU.

The impact of Denmark's actions on the euro and dollar is already evident. Euro strength driven by investor flight from US assets and a generally more positive view of the European economy may continue. A weaker dollar, in turn, will make US goods more competitive globally but will also raise inflationary pressures at home.

It is worth noting that this is already the third Danish fund to cut exposure to U.S. Treasuries. Earlier moves came from Larernes Pension and PFA.

Clearly, the scale matters less than the precedent: $100,000,000 is negligible for the bond market, but the precedent matters because reports now indicate another large fund has publicly rejected Treasuries as a risk?free asset. As noted above, if other institutional investors follow suit, the United States will have to pay higher rates on its debt.

A technical outlook for EUR/USD suggests that buyers should consider reclaiming 1.1745. Only that will allow a test of 1.1765. From there, a move to 1.1785 is possible, although advancing beyond that without support from major players would be difficult. The extended target is the high at 1.1810. In the event of a decline, meaningful buying interest is likely only around 1.1714. If no buyers appear there, it would be prudent to wait for a new low at 1.1690 or to open long positions from 1.1660.

As for GBP/USD, buyers of the pound sterling need to capture the nearest resistance at 1.3460. Only that will allow them to target 1.3490, above which a breakout would be challenging. The extended target is the area around 1.3520. If the pair falls, bears will try to seize control at 1.3425. If they succeed, a break of that range would deal a serious blow to bullish positions and could push GBP/USD down to 1.3400 with scope to extend to 1.3380.

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