Rabobank strategist Molly Schwartz highlights that the US Greenback’s robust efficiency displays renewed safe-haven demand as geopolitical dangers escalate round Iran. She argues prior “Promote America” calls have been pushed by positioning and EUR/USD repricing reasonably than a lack of Greenback safe-haven standing. Rising US Treasury yields underscore issues that war-related vitality shocks may complicate the Federal Reserve’s inflation problem.
Dollar advantages from renewed threat aversion
“Yesterday’s stellar efficiency of USD additionally exemplified how calls of “Promote America” in latest months have been shortsighted.”
“Whereas USD has not been behaving as a safe-haven historically would, given the dramatic USD sell-off in H1 2025, we’ve got lengthy argued that this was extra about positioning—a repricing of EUR/USD within the aftermath of European announcement of protection spending, and rising USD hedge ratios from international traders—than it was a lack of USD’s protected haven standing.”
“Certainly, latest value motion makes it clear that when the going will get tough, traders nonetheless flee to the nice and cozy embrace of buck liquidity.”
“Whereas inflation is already above the two% goal, and the lagged results of tariffs are beginning to put strain on core items, the extra value will increase posed by turning the main oil exporter of the world right into a warzone could put the Fed in a tough place.”
“US 2 yr and 10 yr Treasury yields moved in parallel, closing the day up 11bp, which is the best single day transfer for the reason that US-Iranian skirmish final June.”
(This text was created with the assistance of an Synthetic Intelligence device and reviewed by an editor.)
