Markets are still processing the effects of last Friday’s Supreme Court ruling that ended the “reciprocal” tariffs that sparked the global trade war. The Trump Administration also seems to still be adjusting to the new legal landscape, announcing or threatening tariffs under different statutes. However, some market patterns have started to emerge, and one that is particularly relevant to Forex.
Analysts note that on the first day after the tariff ruling, investors have increased buying of US bonds. This comes amid a market sell-off, as traders are dumping high-valued tech megacap stocks in favour of defensive plays such as utilities and consumer staples. This is classic risk-off behaviour for an overvalued market. What is interesting, however, is the reemergence of US Treasuries as a safe-haven option for many major investors.
The End of the “Sell America” Trade?
Although in its early stages, the trend of major institutional investors buying dollars could be significant for currency markets if it continues. Last year, The Dollar(USD) was down around 10%, contributing to a near 17% gain in EURUSD and upside for other currency pairs. The move was the result of a broader “sell America” trend, as investors deemed US equities highly valued, expected interest rates to fall, and saw the trade war generating economic turmoil and uncertainty.
It fit within a broader trend of de-dollarisation, with countries selling US treasuries amid the nation’s large deficits and uncertain fiscal policy, as well as geostrategic moves. China was one of the largest participants in the de-dollarisation move, and the EU is still attempting to put the Euro forward as a replacement. Total central bank holdings of dollars fell by two percentage points over the course of 2025. As a result, investors were wary of using The Dollar(USD) as a safe-haven asset and preferred other stores of value instead. Gold’s massive run-up during the year was one of the alternatives.
Finding a Better Asset
Gold suffered significant volatility in January as retail traders made its price moves more erratic, undermining some of its allure as a store of value. Analysts trying to figure out why investors are buying more US Treasuries under the circumstances have a couple of theories. One is that the appeal of The Dollar(USD) hasn’t really improved; instead, investors are left with few alternatives.
The Euro might offer comparable political stability, but Eurozone nations also have high deficits. To complicate matters, the economy is growing at a much slower pace, making the deficits much harder to manage, even though the overall debt is lower than in the US.
Tracking Flows and Market Moves
The EURUSD gained briefly after the tariff announcements, but failed to break above the 1.1800 handle and has subsequently declined. The benchmark US 10-year treasury fell to its lowest level in nearly three months, a sign of strong demand for the traditional safe-haven asset.
With Europe’s sluggish economy, the ECB might be forced to cut rates soon if inflation continues to underperform. Meanwhile, there are growing signs that the Fed will stay on hold as the reduction in tariffs is expected to boost the US economy. The dollar might have gotten a little bit oversold last year, and without a better alternative, could se a rebound if the current trend is maintained.