Geopolitical risks coupled with delayed interest rate cut expectations could make the US dollar the ultimate winner.

According to analysts at Capital Economics, global financial markets are likely to be impacted by fluctuations in investor risk appetite as the conflict with Iran unfolds. They warn that if the conflict escalates, government bonds may fail to provide a reliable safe haven, as expectations of monetary easing could be delayed. This is particularly evident in economies like the US, where markets have already priced in numerous interest rate cuts. If sentiment continues to deteriorate, the US dollar could strengthen further, primarily due to the end of rate cuts making relative yields more favorable for the dollar, and the US's status as a net energy exporter. (Jinshi)