Trade turmoil in April 2025 saw a marked change in cross-asset behaviour compared with typical patterns. Notably, the US dollar depreciated strongly while US Treasury yields rose – the opposite of what usually happens in a risk-off environment. This prompted discussions as to whether the safe-haven properties of US dollar-denominated assets might be changing. This is particularly important for euro area financial stability since euro area investors hold US dollar-denominated securities in an amount equivalent to €6 trillion, which represents a significant share of their portfolios. As policy uncertainty remains high and alternative safe assets are scarce, investors’ risk management practices may be evolving. Immediate and decisive implementation of policies associated with the savings and investments union and the capital markets union would help foster an alternative market of safe assets for euro area and global investors.
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