UBS Morning audio comment: War and trade war costs
The desk interprets recent geopolitical tensions and their economic repercussions as key drivers for FX positioning, particularly in relation to US agricultural sectors. Per the full note from UBS, President Trump's measures to alleviate trade war costs amidst rising oil prices create a complex backdrop for investors. As rising input costs challenge US farmers, there are implications for the broader economy, influencing consumption patterns and savings rates. With ECB's likely policy missteps looming, traders should remain vigilant of potential shifts in market sentiment as they approach upcoming job data releases.
What the desk is arguing
The desk frames the ongoing geopolitical tensions and trade policies as mutually influential forces in the FX landscape. President Trump's strategy to mitigate the economic burden on farmers through reduced tariffs is critically positioned against escalating oil prices that harm agricultural profitability, pushing consumers to adjust their spending behavior.
Market dynamics are being shaped by this intricate interplay, particularly as evidence suggests a stagnation in job creation, with many companies adopting a wait-and-see approach due to heightened policy uncertainty. With US job openings data expected, the market will be keenly analyzing this release for insights on labor market stability and consumer confidence.
Where it sits in our coverage
Trading perspectives vary with anticipated ranges influencing forecasts. For instance, jpmorgan projects targets up to 1.10 for March 26, while bofa has a lower call at 1.04 for the same period. Against this backdrop, we observe broader alignment with macroeconomic stability calls around 1.075 from consensus data.
How other firms see it
Firms like jpmorgan and others are closely aligned in their outlooks, expecting USD strength as geopolitical uncertainties unfold. Conversely, firms such as bofa hold a more cautious stance, reflecting potential for dollar depreciation under specific scenarios. Observations on EUR/USD trajectories and ECB policy signals will also act as pertinent indicators as developments unfold.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01US trade and war policies are adversely affecting agricultural costs.
- 02Political uncertainty may constrain job growth, impacting consumer spending.
- 03Consistent alignment with certain banks indicates cautious optimism.
- 04Eurozone inflation and ECB policy decisions are likely to contribute to market volatility.
Market implications
Watch for job openings data, which could reveal more about labor market dynamics and consumer confidence. A significant shift away from current expectations could drive volatility in USD valuations, particularly against the euro where ECB policy missteps are under scrutiny.
Risks to this view
If geopolitical tensions ease unexpectedly or if the ECB signals a stronger commitment to policy tightening, this could lead to a rapid reversal in current USD positioning. Additionally, worse-than-expected job data could spur market panic, affecting consumption trends and overall economic sentiment.
US President Trump attempted to counter the costs of the war policy by reducing costs associated with the trade war. View this email in a web browser War and trade war costs UBS morning audio comment by Paul Donovan Another day, another round of Gulf war stories—the latest originated from semi-official Iranian sources, so markets took them more seriously. Iran’s apparent suspension of negotiations with the US prompted US President Trump to attempt a ceasefire between Israel and Hezbollah.
Market opinions differ as to the terms and effectiveness of this. Rising oil prices hurt US farmers, directly (tractors use a lot of fuel) and indirectly (via things like fertilizer costs). Trump countered the rising costs from war policy by lowering costs from trade war policy, cutting agricultural equipment tariffs.
Farmers planning near-term investment spending benefit by paying lower tariffs—farmers who are just growing crops face higher input costs without relief. Eurozone May consumer price inflation data is a non-event because a) we know the provincial data already and b) the ECB seems determined to commit a policy error and raise rates regardless of the economic signals. US job openings “data” is due.
If this were accurate it would be really helpful, but the survey response rate is very low. Policy uncertainty seems to have paralyzed decision making by US chief executives, leading to a “no hire, no fire” approach. That gives enough job security to allow consumers to reduce savings to meet higher prices.
Read important disclaimer 〉 Listen to today's Tuesday, 2 June update Listen now 〉 Recommended content Listen to past recordings in Paul Donovan's daily updates 〉 Nobel Perspectives - Exploring the questions that shape our world 〉 You have received this email because you registered at . Unsubscribe #end --> | Edit profile Publication data: UBS AG, P.O. Box, CH-8098 Zurich Based on previous e-mail correspondence with you and/or an agreement reached with you, UBS considers itself authorized to contact you via unsecured e-mail.
Warning: (a) E-mails can involve SUBSTANTIAL RISKS, e.g. lack of confidentiality, potential manipulation of contents and/or sender's address, incorrect recipient (misdirection), viruses etc. UBS assumes no responsibility for any loss or damage resulting from the use of e-mails. UBS recommends in particular that you do NOT SEND ANY SENSITIVE INFORMATION, that you do not include details of the previous message in any reply, and that you enter e-mail address(es) manually every time you write an e-mail. (b) As a matter of principle, UBS does NOT accept any ORDERS, revocations of orders or authorizations, blocking of credit cards, etc., sent by e-mail.
Should such an e-mail nevertheless be received, UBS is not obliged to act on or respond to the e-mail. Please notify UBS immediately if you received this e-mail by mistake or if you do not wish to receive any further e-mail correspondence. If you have received this e-mail by mistake, please completely delete it (and any attachments) and do not forward it or inform any other person of its contents.
For information on how UBS uses and discloses personal data, how long we retain it, how we keep it secure and your data protection rights, please see our Data privacy notice . © UBS 2026. The key symbol and UBS are among the registered and unregistered trademarks of UBS. All rights reserved.
Sources & References
How we cover this story