Markets Rally as Trump Suspends EU Tariffs on 'Greenland Framework'

Global markets staged a relief rally on Wednesday (Jan 21, 2026), dubbed by Wall Street as “TACO Wednesday”—triggering a sharp reversal in the week's “Sell America” trade after President Donald Trump suspended threatened tariffs on European allies.

The swift geopolitical pivot saw the US Dollar regain footing against the Yen and Swiss Franc, while the Euro stabilized. The S&P 500 recorded its best session since November, recovering from a sell-off induced by fears of a trans-Atlantic trade war.

The 'TACO' Pivot

The market narrative shifted abruptly after President Trump announced a “framework for a future agreement” regarding Greenland following a meeting with NATO Secretary General Mark Rutte in Davos. Consequently, the administration suspended the 10-25% tariffs on eight European nations—including Denmark, France, and Germany—that were scheduled to take effect on February 1.

Analysts have termed this dynamic “TACO” (Trump Always Capitulates Online), a trading thesis suggesting that the administration often utilizes extreme threats to gain leverage before de-escalating to stabilize financial markets.

“The threat of a fractured NATO and a trade war has been priced out for the moment,” noted a senior strategist at B. Riley Wealth Management.

Forex Market Impact

• Safe Havens Retreat: The cooling of tensions triggered profit-taking in safe havens. Gold (XAU/USD), which had surged to a record high near $4,888/oz on trade war fears, plunged back below the $4,800 handle. USD/JPY found traction above 158.30 as US Treasury yields stabilized.
• Euro Relief: EUR/USD recovered from session lows, though upside remains capped by the looming uncertainty of the finalized deal details. The suspension removes an immediate recessionary risk for the Eurozone, which would have been hit hard by duties on luxury goods and machinery.

Underlying Tensions Persist

Despite the rally, geopolitical risks remain elevated. The “framework” reportedly involves expanded US military access in the Arctic and mineral rights. However, Danish officials remain wary, stating that while the immediate threat is gone, US ambitions in the Arctic remain a source of friction.

For traders, the “TACO” trade suggests that volatility will remain a feature of 2026, with the focus now shifting back to US domestic data, specifically the upcoming PCE release.