With growing U.S. economic uncertainty and heightened volatility, investors are looking for safe-haven currencies. Key geopolitical developments include:

• U.S. tariffs imposed on Canada, Mexico, and China impacting trade relations.

• Trump’s reported pause on military aid to Ukraine, raising concerns about U.S. commitments.

• Weak U.S. economic data and increased European defense spending, influencing currency valuations.

British Pound (GBP) Outlook

Jane Foley, head of FX strategy at Rabobank London, sees the British pound (GBP) strengthening, particularly against the euro (EUR).

The U.S. maintains a trade surplus with the U.K., making GBP less likely to face tariffs. Following a recent meeting with British Prime Minister Keir Starmer, Trump hinted that the U.K. might avoid U.S. tariffs, boosting market confidence. As of Tuesday morning, GBP traded at $1.2712, up 0.1% against the U.S. dollar (USD) but down 0.1% against the euro (EUR).

Japanese Yen (JPY) as a Safe Haven

Foley also highlights the Japanese yen (JPY) as a strong performer, backed by Japan’s economic and trade relations with the U.S.:

• Japan has a trade surplus with the U.S. but remains the largest foreign holder of U.S. Treasury bonds and a leading investor in the U.S.

• Japan’s defense budget is primarily allocated to U.S. military equipment, reinforcing economic ties.

• The Bank of Japan is the only G10 central bank with a tightening bias, making JPY more attractive to investors.

Since the start of the year, JPY has gained 5% against USD, with expectations of continued growth, solidifying its safe-haven status.

Analysts Weigh in on the U.S. Dollar (USD)

David Roche, strategist at Quantum Strategy, believes the U.S. dollar (USD) is losing its safe-haven status due to political instability. He pointed to Trump’s tense exchange with Ukrainian President Volodymyr Zelenskyy as an example of declining trust in U.S. commitments.

Other Currency Reactions

Kamal Sharma of BofA Global Research highlighted the Swiss franc (CHF) as the strongest performer against USD in recent trading. Meanwhile, the Canadian dollar (CAD) rebounded slightly following tariff news.

However, Dominic Schnider of UBS Global Wealth Management suggested that the Swiss franc’s (CHF) safe-haven appeal is diminishing as geopolitical concerns ease. Investors may shift toward higher-yielding currencies such as the Australian dollar (AUD) and British pound (GBP).

U.S. Dollar (USD) and Market Outlook

Christian Mueller-Glissmann of Goldman Sachs still sees potential for USD to rise, despite its recent 2% decline after a 7% surge in 2024.

He also noted that the Swiss franc (CHF) may perform better than expected, as Switzerland could be less impacted by tariffs compared to the EU.

Conclusion

With rising geopolitical risks and shifting trade policies, investors are turning to safe-haven currencies:

Source: cnbc.com, ChatGpt

• Japanese yen (JPY) is emerging as a top choice for stability.

• British pound (GBP) shows strength but lacks traditional safe-haven status.

• Swiss franc (CHF) and U.S. dollar (USD) face mixed market outlooks.