Geopolitical conflicts should act as a restraint on USD bears – Rabobank

Last week’s sell-off in the USD is unlikely to extend further due to geopolitics, according to economists at Rabobank.

Volatility is set to remain high

“NATO chief Stoltenberg has warned that ‘we should not make the mistake of underestimating Russia’ and that ‘the coming months will be difficult’. Additionally, there remains plenty of risk that tensions between the US and China, Europe and China and Japan/Australia and China will flare again.”

“From the point of view of the FX market, the strongest conclusion that can be drawn from the geopolitical news flow of the past week is that volatility is set to remain high.”

“While recent news has brought welcome relief, resolution on either the war or on the differences between China and the West and its allies still appears distant, and this should act as a restraint on USD bears.”