Tariffs, geopolitical uncertainty and economic issues are affecting the forex market, analysts say.
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The outlook for the U.S. economy is deteriorating, and expectations for further market volatility are driving a shift in currency valuation – market observers split which currency they see as a solid safe haven.
This month’s geopolitical developments have brought us to Canada, Mexico and China President Donald Trump falls into influenceS report paused military aid To Ukraine, U.S. economic data is soft and European leaders are committed to Increase defense spending.
Jane Foley, head of strategy at Rabobank, London, told CNBC via email on Tuesday GBP and Japanese yen Become a winner in the current environment.
“The fact that U.S. data shows that there is a modest trade surplus with the UK shows that the latter is unlikely to be in Trump’s sight, and GBP is likely to continue to run-in with a higher euro on the euro,” she said. “That is, calling the pound a safe haven is very stretching.”
trump card hint Britain may be able to avoid becoming a target of U.S. tariffs after meeting with British Prime Minister Keir Starmer last week.
Sterling traded at $1.2712 at 10:19 a.m. Tuesday, up 0.1% against the dollar, but shares against the euro fell about 0.1%. According to LSEG data, the UK currency rate has risen by 1.6% since the beginning of the year.
Pounds and US dollars.
“Japan also has a lot of help in dealing with the United States,” Foley told CNBC. “While Japan has a trade surplus with the United States, it is the largest Treasury holder outside the United States and the largest provider of US foreign direct investment (FDI) (Shigeru) Ishiba has already Ensure increased investment flow The growing defense budgets entering the United States and Japan are almost all spent in the United States”
Furley also pointed out that Japan’s policy environment favors the yen, and the green guard rate has risen by 5% since the beginning of this year.
“As long as Japan’s fundamentals improve, and given that Japan’s Bank is the only G10 central bank with tightening bias, I hope this year (the yen) will perform well, which may enhance its certificate as a safe haven,” she said.
David Roche, strategist at Quantum Strategy, agreed that the current situation supports the long-standing status of the Japanese currency to hedge, which shows that Western geopolitical instability can be consolidated as a “new safe haven.”
Roche talked about CNBC’s “Squawk Box Europe” on Monday, discussing Trump and Vice President JD Vance’s public confrontation with Ukrainian President Volodymyr Zelenskyy in the Oval Office last Friday.
Roche believes that the Trump administration’s policies can view the Green Guard as a safe haven for the foreign exchange market.
“The biggest loser is actually the United States, because no one will trust the U.S. treaty again,” he said. His comments were posted in front of White House officials. Tell the media On Tuesday, the United States suspended all military aid to Ukraine.
“You want to stay away EUR And owns the yen, which is now the new safe haven, because the United States looks very dangerous. ”
Kamal Sharma, FX strategist at BOFA Global Research, took a different stance on Roche and believed that the impact of Trump’s tariffs could have a limited impact on the money market.
“The FX largely strides through the announcement overnight, despite the slightly defensive tone in the G10 FX this morning, while (CHF) (CHF) leads the gains with the dollar, and even (Canadian dollar) recycles some initial losses,” he said in an email comment on Tuesday. “The high Beta G10 FX is under some pressure, especially the anti-plant of Chinese agents.”
“We have used the term ‘Tariff Purgatory’ to describe how the market has been wary of the market since the beginning of the year,” Sharma added. “So, in the context of what has been said, the announcement is not entirely unsurprising. Part of the narrative now is that overnight developments put the ball firmly firmly in the EU courts, and there is more urgency to strengthen defense spending, which is helping European stocks (European stocks) ( EUR) passes higher (bond) yield. ”
However, Dominic Schnider, global head of foreign exchange and commodities at UBS Global Wealth Management, opposed the case of the Swiss franc growing throughout the Atlantic Ocean.
“With geopolitical concerns, the ‘safer’ appeals of the franc are decreasing, and investors may turn more to higher-yield currencies such as (AUD) and (GBP),” he said.
“In our opinion, the overall return prospect for the Swiss franc is not convincing, and although it should be traded with the euro for most of the year, the franc is still under pressure for better output.”
Meanwhile, Christian Mueller-Glissmann, head of asset allocation research at Goldman Sachs, told CNBC’s “Street Sign Europe” on Monday that he still hopes the dollar rises. Since the beginning of this year USD Index – In 2024, the U.S. currency was measured in a basket of large competitors, up 7% in 2024.
“We do think there’s still a benefit…(our) dollar,” said Mueller-Glissmann. “I know the dollar is now a different story…but, with the rest of the world looking better. But if you want to look at the Safe Haven FX, a currency that hasn’t done anything in the last nine months is the Swiss franc – our team has had a big impact on tariffs on Switzerland, and you’re actually probably lower than what you’ve got for EU or many other countries.”
