The dollar index dropped 0.7% – marking its biggest one-day drop since mid-December – as investors worried about exposure to U.S. markets

The dollar was set for its biggest daily decline in over a month on Tuesday, after White House threats to Europe over the future of Greenland triggered a broad selloff across U.S. stocks and government bonds, and drove the euro and the pound higher.

The dollar index dropped 0.7% – marking its biggest one-day drop since mid-December – as investors worried about exposure to U.S. markets.

On Monday, U.S. President Donald Trump’s renewed tariff threats against European allies prompted a repeat of the so-called “Sell America” trade that emerged after last year’s “Liberation Day” tariff announcement in April, with stocks, Treasury bonds and the dollar all declining.

Investors were dumping dollar assets on fears of prolonged uncertainty, strained alliances, a loss of confidence in U.S. leadership, potential retaliation and an acceleration of de-dollarisation trends, said Tony Sycamore, market analyst at IG in Sydney.

While there are hopes the U.S. administration may soon de-escalate these threats, as it has with prior tariff announcements, it is clear that securing Greenland remains a core national security objective for the current administration, he added.

The euro was last up 0.57% at $1.1711, while the pound added 0.01% to trade at $1.34. Sterling got a minor additional lift earlier in the session from UK labour market data that showed unemployment remained at a five-year high, but also offered positive signs such as vacancy numbers plateauing.

The S&P 500 and Nasdaq Composite declined to their lowest​ points in a month on Tuesday, as investors returned from the U.S. long weekend and reacted negatively to the new tariff threats.

The risk-off wave, which also pushed the Dow Jones Industrial Average to its lowest intraday level since January 5, left U.S. Treasuries wobbling under renewed selling pressure.

We knew that some stock markets like the U.S were all at elevated, stretched levels. So, who knew what the pinprick was going to be? But we found it, said Marc Chandler, chief market strategist at Bannockburn Capital Markets.