United States Dollar: Haven status tested by Fed shift – Rabobank
Rabobank’s FX Strategy team notes the Dollar has recently been supported by both safe haven demand and shifting expectations for Federal Reserve policy. The bank highlights that improved prospects for a US–Iran peace deal and reopening of the Strait of Hormuz could reduce safe haven flows into the USD. However, a more hawkish-than-expected stance from new Fed Chair Warsh is currently underpinning the Dollar.
Safe haven flows versus Fed repricing
"Over the past few months, the USD has been driven both by safe haven flows and by a change in market expectations regarding Fed policy. Within a short space of time late yesterday both factors appeared to collide with the signing of the MoU by both the US and Iran coinciding fairly closely with the Fed’s policy meeting. This morning, the DXY dollar index is trading higher which may be signalling that the net impact of these divergent factors has been USD positive."
"The rise in the USD’s value at the start of the Iran war appeared to prove it remained a safe haven. These credentials have been up for debate since both the greenback and US treasuries dropped on the back of US President Trump’s tariffs address in April 2025. We have maintained that the desire for liquidity would preserve a safe haven bid for the USD in times of acute uncertainty, and that the USD’s sell off last spring was a function of years of the ‘buy America’ trade."
"This week has brought positive news on the potential for a peace deal and the re-opening of the Strait of Hormuz. The latter should result in a decline in safe haven demand, which has the potential to weaken the USD. However, the more hawkish than expected stance of new Fed Chair Warsh at yesterday’s Fed meeting has overwhelmed USD bears and revitalised the bulls, at least for now."
"Looking forward, the USD will be vulnerable if rate hike forecasts are pared back. That said, we remain doubtful as to whether the EUR has the ability to re-kindle strong upward momentum."
"It is Rabobank’s central view that steady rates will prevail this year. However, market pricing currently suggests scope for almost 40 bps of tightening on a 6-month view."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
You may also like
The AI boom may follow the path of the 19th-century railway bubble, and builders may not be the ultimate winners
Goldman Sachs analyst Bobby Molavi compared the current situation to the 19th-century British railway mania: 500 companies spent more than the nation's annual income building 8,000 miles of railway, with most early investors losing out, while the real beneficiaries were the later "passengers." He pointed out that the current AI craze is driven by both debt and momentum, and that the S&P 500’s forward P/E ratio of 18x is only "a bit cheaper." Whether the builders can retain value is uncertain, and history does not offer an optimistic answer.
If Anthropic's IPO goes smoothly and the stock price rises next week, then everything remains the same for AI. Otherwise, some companies will go bankrupt.
The shrinking valuations of two major giants have triggered a chain reaction—investors are adopting more conservative revenue multiples for AI startups and are directly halting high-valuation financing for companies with zero revenue. Multiple venture capital firms have advised their portfolio companies to lower valuation expectations and to quickly build up cash reserves. Market participants warn that the outcome of Anthropic’s IPO will be a barometer for the industry: if successful, the boom will continue; if it fails, some companies may face elimination.
After the Brazilian election, political discount deepens; Morgan Stanley remains bullish on Petrobras (PBR.US), focusing on fuel pricing and dividends
Morgan Stanley still maintains its most optimistic "Overweight" rating, but has lowered its year-end 2027 target price from $31 to $25.
Corning (GLW.US) receives initial "Buy" rating from Jefferies! AI factories driving a fiber optic rush, with a potential global supply gap of up to 30%
For Corning, the recent profit growth mainly comes from the expansion of AI clusters. As the number of optical links crossing cabinets and campuses increases, customers need to deploy more optical fibers within limited conduit and cabinet space, thus driving demand for high-density optical cables and connection systems.
Crypto prices
More
