In response to recent geopolitical newsflow, many currencies are behaving in a typical ‘risk-off’ fashion. Any claim to safe-haven status for the euro is side-lined for now, given the considerable downward pressure it faces. What’s more, the traditional safe-haven US dollar and yen should strengthen against the ‘risk-on’ currencies, irrespective of rates, for now, economists at HSBC report.

Any claim to safe-haven status for EUR side-lined for now

“The EUR has been under considerable downward pressure, illustrating that its gradual transformation to a safe-haven currency still has some way to travel. The triggers for this current bout of risk aversion were a stern test of any safe-haven allure for the EUR, given the geographic proximity and Europe’s reliance on energy imports from the region.”

“The ‘risk-off’ playbook has unfolded, and it is not the time to take a more optimistic path yet. As such, the traditional safe-haven USD and JPY should strengthen against the ‘risk-on’ currencies, irrespective of rates for now.”