📝Tarrifs Likely to Dominate FX Risk Premium: J.P. Morgan Strategy

If current US presidential polling persists, risks to the dollar from the elections will be skewed to the upside as the

market processes the possibility of new tariffs. President Joe Biden and former President Donald Trump are currently polling similarly one year ahead of the election. We see several policy channels that could impact FX: trade policy/ tariffs, US-China relations, fiscal policy and currency policy In our view, tariffs are dollar-positive and the likely dominant channel of FX risk premium. Broadening of the US-China conflict is also dollar-positive. Fiscal policy should command less FX risk premium this cycle that in the past, with any tariffs proposal taking centre-stage and less scope for transformative policy relative to 2016 and 2020

-J.P. Morgan FX Strategy