Hedge funds moved out of bullish euro positions and flipped to a small net short just days before US President Donald Trump threatened new tariffs on European nations amid escalating tensions over Greenland, according to a report by Bloomberg.

Data from the Commodity Futures Trading Commission (CFTC) shows leveraged funds turned bearish on the single currency in the week to 13 January — the first negative shift since late November — potentially adding further downside pressure on the euro.

The move came shortly before Trump warned he could impose trade levies unless Europe agreed to negotiations linked to US efforts to acquire Greenland, raising fears of a renewed transatlantic trade dispute.

Market participants said hedge funds may now look to increase short positions if tensions escalate. Analysts also warned that currency markets may be underpricing the risk of extreme outcomes, with the euro seen as particularly vulnerable should a broader trade war emerge.