Signal over Noise with Ulrike Hoffmann-Burchardi
At a Glance
The desk posits that ongoing shifts in U.S. trade policy, particularly recent tariff announcements targeting European nations, signal a renewed geopolitical tension that carries broader implications for currency markets. Per the full note from UBS, President Trump's reassertion of interest in Greenland, accompanied by new tariffs, suggests a strategic realignment that could influence USD strength against the Euro and other currencies. With little scheduled economic data releases in the near term, traders should remain attentive to evolving trade rhetoric as a potential catalyst for market movements.
Key Takeaways
- 01U.S. tariffs targeting Europe signal a possible escalation in geopolitical tensions with currency implications.
- 02Trump's Greenland interest suggests strategic military and economic motivations behind tariffs.
- 03Current consensus forecasts indicate potential bearish trends for Euro and GBP against USD.
- 04Market volatility is expected as trade negotiations may lead to rapid shifts in currency valuations.
Full Analysis
What the desk is arguing
The current geopolitical landscape, influenced heavily by the U.S. government's trade policies, is likely to produce substantial volatility in currency markets. Recent tariff announcements may not only prompt immediate market reactions but could also set the stage for longer-term shifts in currency valuations. Per the full note from UBS, Trump's announcement is indicative of a strategic pivot in U.S. foreign economic engagement that traders must take into account.
Given the hefty 10% tariffs starting February 1 on a range of European countries—from Denmark to France—the market may respond with increased volatility in the Euro and GBP. The potential escalation to 25% tariffs by June adds to the uncertainty and suggests a bearish outlook for these currencies against the USD if negotiations deteriorate further.
Where it sits in our coverage
Our consensus target sits at 1.075 for the EUR/USD pair, with a range of 1.04 to 1.12 among market participants. Specifically, jpmorgan has set a target of 1.10, while bofa sees a lower target of 1.04.
This desk's view aligns closely with jpmorgan's assessment, placing it at the upper end of the consensus forecast range. We are cautiously optimistic in the face of rising tides of geopolitical risk that deviate from historical norms.
How other firms see it
Firms like jpmorgan and credit suisse are aligned in anticipating a rise in USD strength against the Euro due to geopolitical factors, while bofa maintains a more pessimistic view, anticipating further weakness for USD against the Euro. The divergence illustrates the broader market debate on the implications of U.S. tariffs.
The recent announcements create a significant focus on the EUR/USD and GBP/USD pairs, reinforcing critical strategies around central bank policies and geopolitical developments. Investors should monitor price movements closely between these pairs in light of evolving trade dynamics.
Market Implications
Watch for movements in the EUR/USD around the 1.075 level, particularly as traders navigate geopolitical risks stemming from U.S. tariffs. Upcoming periods of volatility could reshape positioning strategies in response to new developments in U.S.-European trade relations.
From the original
Tune in at the start of the trading week ahead of the New York opening bell as Ulrike Hoffmann-Burchardi, CIO Americas and Head of Global Equities for UBS Wealth Management, briefs you on what’s the signal, and what’s just noise in the markets. Recorded on 19 January 2026.
Related speeches
4 itemsUBS On-Air: Paul Donovan Daily Audio 'This green and pleasant land?'
Recent commentary from UBS highlights the implications of potential US tariffs related to Greenland and how they may affect consumers in the EU and UK. Donovan notes that these tariffs could lead to price increases of 4% to 10% for American consumers. This scenario poses a stark contrast to the ongoing affordability concerns the US administration is grappling with, revealing the tension in policy objectives. Per the full note [source], the resulting uncertainty in the trade landscape also poses challenges for businesses, as many are still navigating the ambiguity of US policy. Traders should remain vigilant of how these developments might impact FX sentiment, particularly in relation to USD movements against major currencies.
Across the Pond: What comes next for global trade?
The desk posits that the recent escalation in trade tensions, exemplified by the April 'Liberation Day' tariff announcements, indicates a potential shift towards a prolonged trade conflict characterized by higher tariffs, particularly affecting European markets. Per the full note from UBS, this uncertainty raises critical questions for investors regarding sector vulnerabilities and portfolio positioning strategies in light of shifting trade policies. Current trends suggest that sectors heavily reliant on exports may experience immediate impacts, warranting a cautious approach in currency positions. Therefore, investors must remain vigilant to evolving dynamics on this front, especially regarding the implications for the euro as tensions escalate.