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Annual & Mid-year Outlook | FX

Demand for Safe Havens could Continue

Key Takeaways

  • While considerably lower than the spike in early March, FX volatility has not returned to pre COVID-19 lows, likely signalling investor anxiety.
  • Uncertainties and bouts of risk aversion could keep safe haven currencies like gold and JPY in demand.
  • With the US Fed on alert to address any USD supply/demand issues, monetary stimulus may pose headwinds to the USD, leaving it not quite the safe haven it used to be. Aggressive Fed balance sheet expansion to address USD liquidity demand would likely leave USD weaker over the medium- to longer-term.