Following President Trump's tariff announcement, the euro has shown surprising resilience, acting more like a safe haven currency alongside the Swiss franc and Japanese yen. Amid rising global uncertainty and shifts in investor sentiment, current account dynamics and political developments in Europe have helped support the euro's performance, Rabobank's FX analyst Jane Foley reports.
Pound struggles as euro gains ground
"Since US President Trump detailed his tariff policy on April 2, the EUR has been doing a very good impression of a safe haven currency. In the period since the Rose Garden address it has been the third best performing G10 currency after the CHF and the JPY, both of which are long established safe havens. There is one key fundamental that all three of these currencies share, that of being associated with current account surpluses in each of their respective countries."
"The consensus view is that the EUR lacks the fundamentals that would make it a real safe haven. The single currency is only 25 years old, and its brief history has a strong association with a major debt crisis. The latter can be taken back to the question that has dogged the EUR since before its inception - whether monetary union can be permanent situation without closer fiscal and debt ties between member countries. "
"There have been short pockets of time in the past twenty years or so when the pound has adopted some safe haven behaviours. These, however, are likely better described as periods when investors have been looking to diversify their European exposures. While it would not be surprising for the EUR to give back some of the gains made in the past few days, we have adjusted our EUR/GBP forecasts higher and now see the currency pair at 0.85 on a 6 month vs. compared with a previous forecast of 0.83."
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