Dollar's safe haven status continues to lose appeal - SocGen

The firm notes that the dollar's safe haven status in the short-term has been undermined by a myriad of factors as we get into the new year. Of note, a steady flow of US-initiated geopolitical surprises as well as Trump's clear preference for wanting lower interest rates are creating a major headwind for the currency. On the latter, I think we can just call it what it is; that being a clear attack at the Fed's independence.

Societe Generale goes on to note that even with positive US growth, wider rate differentials, and already sizable net short positions in the dollar have not provided much comfort to the greenback. Adding that gold's performance to start the year and near 70% gains in the past twelve months points to investors reducing exposure in the dollar rather than rotating into other fiat currencies.

In other words, the play looks to be continuing to look for commodities i.e. precious metals in particular in taking advantage of the dollar's vulnerabilities.

But among G10 currencies, the firm argues that the most constructive long position favoured is the Australian dollar. They would stay bullish in the aussie "even if broader geopolitical uncertainty makes outright US dollar shorts less straightforward".

With risk sentiment continuing to hold up, that's a fair argument alongside the key narrative that the RBA looks to be among the first of the major central banks to pivot to rate hikes next.