Paul

US DECOUPLING

Increasingly, many governments and businesses are quietly trying to decouple themselves from any reliance on the US. That would include military spending and in corporations. One example of that is the Port of Hamburg, which actually doesn’t want to use US technology platforms anymore because it doesn’t want sensitive information being processed through infrastructure. The US indirectly has access. In terms of US tech companies, many European clients are stressing that America has become a less reliable partner due to the pressure the US government can put on companies to demand information. In general, policies such as tariffs, export controls and sanctions as well as stimulus measures such as the Inflation Reduction Act are beginning to unnerve even US allies. They’re also deeply worried about internal politics.

ASIA AND THE DOLLAR

Asia is making major moves away from the US due to concerns over US geopolitical policies, major shifts in monetary policy and a massive amount of hedging now taking place. These factors are driving de-dollarisation across the entire region.

ASEAN countries are committed to significantly increasing the use of local currencies for trade and investment. This is part of their economic community strategic plan running through to 2030. The goal is to reduce the shocks associated with exchange rate fluctuations by promoting local currency settlements and strengthening regional payment connectivity, all outside the US dollar system.

At the same time, investors and market officials are starting to believe the dollar has been over leveraged and weaponised in trade negotiations. In response, these countries are standing up, reassessing their heavily USD-weighted portfolios, and taking action.

Individuals and businesses are converting US dollar savings back into local currencies,

RUSSIAN FROZEN ASSETS

In terms of frozen Russian assets in Europe there is a growing realisation that Germany could lose significantly more than €100bn if these assets were to be transferred to Ukraine. Germany which is heavily invested in Russia, more than any other country, could see reciprocal Russian measures resulting in Germany making huge financial losses This underscores the complex inter-dependencies in Europe and the potential consequences of making hasty ill-advised decisions regarding Russian frozen assets. This would have massive implications for the German economy and by implication the wider Eurozone.