The Shifting Tides
A decisive shift is underway in global currency markets. The US Dollar, long the dominant force, is facing sustained pressure, creating a new landscape of risks and opportunities for investors.
The Tariff Impact
Since the start of the year, broad-based trade measures have dramatically altered the economic outlook.
The effective US tariff rate has seen a sixfold increase, intensifying downside risks to US growth and employment.
Decoding the Dollar’s Decline
A combination of factors is weighing on the US Dollar, prompting global investors to reassess their exposure.
Trade Tensions & Tariffs
Increased tariffs slow economic growth and create uncertainty.
Federal Reserve Pivot
Market expectation of rate cuts reduces the “yield” on holding dollars.
Mounting Fiscal Concerns
Rising national debt weighs on long-term sentiment.
The Euro’s Ascent
The Euro has emerged as the ‘default’ alternative, supported by strong fundamentals and proactive policy.
German Fiscal Stimulus
A substantial package is expected to lift Eurozone growth and inflation.
ECB Policy Pause
The European Central Bank pausing further easing makes the Euro more attractive.
Deep, Liquid Markets
Europe’s strong investment position continues to attract capital flows.
A Tale of Two Currencies
Since the sharp market moves in April, the trajectories of the US Dollar and the Euro have diverged significantly.
Global Currency Scorecard
Our view on key currencies in the current environment, reflecting their relative strengths and weaknesses.
The Road Ahead: A Binary Risk
The upcoming US tariff deadline on August 1st presents a major fork in the road for markets.
Scenario 1: Extension
An extension of the deadline would likely support risk sentiment and continue the current trend of USD weakness.
Scenario 2: Higher Tariffs
A move to much higher tariffs could trigger a market sell-off and a flight to safety, potentially causing a short-term USD rebound.