There is no doubt that Europe’s response to changing US policies has been swifter and more definitive than expected. In isolation, stronger fiscal spending should be a powerful antidote to policy uncertainty and other maladies that have plagued the Euro.
We have just returned from marketing in the UK over the past week (March 3-7th), which overlapped with announcement of Germany’s unprecedented fiscal package and several tariff related announcements.
The last four weeks have delivered more uncertainty and volatility as expected and yet there were still a lot of surprises. Particularly surprising is the retreat of the USD amid rising risk aversion. Is this the end of US exceptionalism and USD supremacy? Perhaps, but uncertainty remains too high to take strong po- sitions. The safest bet in our view remains long JPY.
