💵 Temporary Geopolitical USD Premium Unwound: Cable FX Macro

• A continuation of the 2025 weakness in the dollar was seen early this year as the market priced in Fed monetary policy, Trump trade tensions, and geopolitical concerns on Greenland. The war risk premium saw this softness reversed in late February; the dollar got a bid out of safe haven demand and the oil price channel.

• Our own dollar index shows this reaction function. However, the bid failed to top the early January levels. An alternative measure, the DXY, concentrates weight on the EUR. Showing a massive repricing in the dollar, we opt to hold a more evenly distributed dollar index across the G10.

• A two-week ceasefire announced around April 7–8, with Iran confirming the strait’s reopening and safe tanker passage verified. Crude fell by double-digits as traffic fears eased. Our measure of the dollar showed the index falling below pre-Iran war levels.

• Energy-chokepoint shocks can quickly inflate the dollar via dual haven + oil channels; when physical disruptions ease and diplomacy advances, that premium unwinds just as fast—often within weeks. The 2026 episode was a textbook case of temporary geopolitical pricing in FX markets.