At Any Rate
Global FX: Fed, not trade, is weighing on the dollar
Feb 21, 2025
James Nelligan, a Global FX Strategist at J.P. Morgan, joins fellow experts Arindam Sandilya and Junya Tanase to navigate the complexities of foreign exchange dynamics. They delve into how shifting tariff risks are impacting the dollar and the promising outperformance of European equities. Nelligan discusses the surprising strength of the yen despite economic hurdles, while also predicting the implications of upcoming German elections on currency markets. The interplay of Chinese equities with regional currencies adds another layer to this intriguing analysis.
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Quick takeaways
- The dollar's recent struggles are attributed to tariff fatigue and stronger performance of foreign assets, particularly in Europe and Asia.
- The Japanese yen's recent strength may not be sustainable due to already priced policy expectations and ongoing domestic pressures.
Deep dives
Challenges to the Bullish Dollar View
The bullish dollar perspective that had dominated since the U.S. election has faced significant challenges this year. Despite frequent tariff-related headlines, the market is experiencing tariff fatigue, where the daily announcements generate noise but lack immediate implementation risks. This environment has resulted in a shift where assets in regions outside the U.S., particularly in Europe and Asia, have begun to outperform U.S. equities. The discussion highlights a potential common global factor, notably U.S. real yields, that could be contributing to this widespread rally in risky assets and depreciation in the dollar.
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