Mahjabeen Zaman 3.7 2 ideas

The dollar recently lost its safe-haven bid despite the conflict. Analyst cites U.S. policy uncertainty (2025 election) and fiscal challenges as downward pressures, but expects 3 Fed cuts in H2 2024. The dollar's path is a "push and pull." It faces structural domestic headwinds (politics, fiscal, Fed cuts) but its near-term trajectory is linked to the Strait of Hormuz reopening and the consequent oil price move, which affects inflation and growth dynamics. Mixed drivers create a neutral outlook, with no clear directional edge from the geopolitical lens alone. A sustained oil price spike from a prolonged Strait closure could alter the Fed's reaction function and provide dollar support, overriding domestic political concerns.

Japan faces fiscal uncertainty and recent inflation data shows disinflationary momentum. ANZ expects only one rate hike or less. The "fiscal risk premium" is being attached to the Yen. Without aggressive rate hikes to support the currency, and with the government struggling to fund tax cuts, the path of least resistance for the Yen is lower (USDJPY higher). Short JPY (or Long USDJPY). A massive risk-off event (war in Iran) could trigger safe-haven flows back into the Yen despite fundamentals.