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07.21.2025

Back on track

In H1, the turbulent onset of Trump’s second term disrupted traditional market correlations, weakening the USD’s role as a safe haven during risk-off periods.

​​Since May, Trump’s more conciliatory stance on the ongoing tariff dispute has contributed to the gradual restoration of traditional market correlation patterns, which in turn has helped to limit further downside pressure on the U.S. dollar.

Against this backdrop, we anticipate the gradual reestablishment of the traditional “risk-on, dollar-down” dynamic to continue in the coming months, with the divergence in the growth-inflation mix and in monetary policy between the U.S. and the Euro Area likely to regain prominence as key drivers of the EUR/USD exchange rate.

Nonetheless, while we do not believe the dollar’s safe-haven status has undergone a structural change, we continue to caution that current market signals point to a fragile and incomplete transitional period, with FX volatility still elevated.​


VALERIO CEOLONI 
Senior FX/EM Strategist
 






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