USDJPY: Take Profit at 153.74

The USD has emerged as one of the best performing currencies after risk aversion spiked in the immediate aftermath of the tariff announcements by the Trump administration over the weekend. Market sentiment has been improving somewhat since then, however, on the back of investor hopes that the announcements were part of President Donald Trump’s negotiation tactics. As a result, the prospects for further USD-gains will increasingly depend on the relative growth and inflation outlook between the US and the rest of G10.

We also think that the US economy could be better able to cope with an all-out global trade war than most of its trading partners but note that international investors have a huge exposure to US stocks and that they could cut some of these longs if the US growth outlook deteriorates in the coming months. This could limit any USD gains vs the other safe-haven currencies like the JPY, CHF and even the EUR.