Below is a summary; for full report and detailed charts, please download the PDF


Latest G10 DEER valuations



Across major G10 currencies, JPY and CAD are the most under-valued. JPY’s undervaluation has narrowed significantly, with risk aversion related to Trump’s tariffs helping to support JPY, on top of expectations of further BOJ policy normalization. Meanwhile, the CAD’s undervaluation has deepened given Canada’s high export dependence on the US, and a looming threat of fentanyl-related tariffs.

USD remains most over-valued, though its valuation is narrowing as investors divest from US assets due to elevated US policy uncertainty. CHF is still highly over-valued, as its safe haven status has attracted large inflows amid tariff concerns. GBP and EUR are similar in being moderately over-valued, with both currencies having rally significantly due to Europe’s relative stability. The DEER methodology has also been enhanced, with IMF data on the terms of trade for all 8 G10 currencies extended with the latest export and import price indices.

DEER Strategy Recommendations

Our DEER strategy continues to hold longs in JPY, CAD, and AUD. The Strategy has also removed GBP long after a 1Y holding period.

Trump’s announcement of sweeping reciprocal tariffs on all US trading partners in April, followed by a swift suspension of them for 90-days pending “negotiations” for all except China, had created immense uncertainty for global asset markets.

The JPY could be supported with high uncertainty related to trade, with investors likely to be cautious of carry trades based on the JPY. The BOJ may have marked down its growth and CPI forecast for FY26 & 27, but these forecasts are also subject to high uncertainty. Should Japan’s ongoing trade negotiations with the US yield a market-friendly outcome, then the BOJ could have to return its attention to a pick-up in inflation. Japan’s core inflation has rebounded to 3.2% y/y in March, driven by soaring rice prices on top of increases in other food prices.

While Canada’s Carney will lead a minority government after falling three seats short of a majority, the sharp turn in sentiment towards the Liberals this year suggest popular support for policies to ward off the threat from Trump’s tariffs. Carney will be negotiating with Trump to contain any further expansion of tariffs, and safeguard the exemptions being granted to USMCA-compliant goods, particularly for the auto sector. Assuming successful negotiations, there is scope for the oversold CAD to recover further.

AUD had a tumultuous start to 2025, dipping below 0.60 in early April following a large global sell-off, before staging a full recovery to hit its 2025 high on the back of improving risk appetite. Now, China and the US had announced that Vice Premier He and Treasury Secretary Bessent will meet for trade negotiations. AUD stands as a likely beneficiary of any de-escalation in US-China trade tensions and a negotiated reduction in tariffs. Current tariffs set by the US and China for each other’s goods are too high and are not in the interests of either country.

The DEER Strategy retains shorts in USD, CHF, and EUR. The USD has eased sharply against European currencies, but less so against Asian and commodity FX. Investors are growing worried about US assets given elevated policy uncertainty in the US, with Trump imposing erratic tariff policies and questioning Fed Chair Powell’s management of monetary policy. Going forward, the US’s high valuation could ease more broadly as the narrative of US exceptionalism has faded, with the US likely to confront slowing growth and rising inflation due to tariffs.

CHF overvaluation remains very high, despite a cumulative 150bps of SNB rate cuts since March 2024 that had brought the policy rate down to 0.25%. The SNB is now expected to cut rates to zero in June to ward off appreciation pressures on the CHF due to haven inflows. SNB President Schlegel has said that CHF appreciation is now very noticeable, and that policymakers are ready to intervene in FX markets for price stability. Furthermore, he confirmed that SNB could opt for negative rates. CHF strength is beginning to look excessive enough to trigger a degree of policy pushback.

EUR’s over-valuation has expanded sharply following an over 10% rally from January lows. Despite 175bps of rate cuts since June 2024 to 2.75% in January, the EUR has benefitted from being the major alternative reserve asset that investors wary of US policy risk could reallocate to. With EUR being almost as over-valued as GBP but with a much lower interest rate and prospects of further ECB rate cuts, a EUR short is still comparatively more attractive.


To read the full report, click here to Download the PDF.