Short

HSBC on EURUSD

Over the weekend, the EUR reversed some of the weakness seen on Friday as some element of a ‘peace dividend’ reemerged. That dividend was dented materially by Friday’s events at the White House, with progress towards a US- sponsored ceasefire collapsing. Since then, European leaders have met and are pushing for extra defence spending, as well as a European-driven push for a ceasefire, a subsequent “coalition of the willing” to help secure Ukraine with US backing. The EUR gained, perhaps buoyed by the gains in defence stocks on the equity market, but also by a reemerging peace dividend. We have argued in the past that this dividend is likely to be modest in scale, and we are unconvinced that it will drive lasting upside for the EUR. Friday’s events also reminded the FX market of how unpredictable the tone of US policy can be, with potential read across for upcoming tariff deadlines. The USD is likely well placed to capitalise on any renewed angst.

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1. AccuTrade System:
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