Geopolitical tensions rise, boosting safe-haven currencies like the US dollar and the British pound

【BlockBeats】Recently, geopolitical tensions have added new waves. The foreign exchange market on January 5th showed typical safe-haven characteristics— the US dollar strengthened, the British pound slightly declined against the US dollar, but the pound against the euro surged to a two-and-a-half-month high.

The logic behind this is quite clear: geopolitical tensions in Venezuela and Iran have boosted risk aversion, and the US dollar, as a traditional safe-haven asset, naturally benefits. Interestingly, the pound against the euro has strengthened instead. Analysts point out that the euro is more sensitive to trade disruptions, which makes the pound relatively more resilient in this comparison.

However, they also warn that this trend might be short-lived. Looking ahead to 2026, the UK’s domestic political environment remains a hidden risk, which is not very friendly to economic growth and the outlook for the pound. In contrast, the euro might receive more support from fiscal stimulus policies in the Eurozone. In short, short-term movements are driven by geopolitical factors, but long-term fundamentals will still matter.