EUR/USD falls to near 1.1700 due to safe-haven demand

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EUR/USD extends its losses, trading around 1.1710 during the Asian hours on Monday. The pair loses ground as the US Dollar (USD) strengthens on safe-haven demand, driven by a renewed rise in geopolitical risks following the United States’ (US) capture of Venezuelan President Nicolas Maduro.

EUR/USD depreciates on safe-haven demand amid renewed geopolitical risks after the US captured Venezuelan President Nicolas Maduro.
US President Trump said the US would administer Venezuela until a safe, orderly, and judicious transition is achieved.
The Euro may gain support as ECB and Fed monetary policy paths diverge.

CNN reported over the weekend that the US President Donald Trump administration ordered a “large-scale strike against Venezuela” and captured President Maduro to face charges, without congressional approval. Trump added that the US would oversee Venezuela until a safe, orderly, and judicious transition could take place.

However, the upside of the US Dollar could be restrained due to expectations of two additional Federal Reserve rate cuts in 2026. Markets are bracing for US President Donald Trump to nominate a new Fed chair to replace Jerome Powell when his term ends in May, a move that could tilt monetary policy toward lower interest rates.

The Euro (EUR) could find support against the Greenback as monetary policy paths diverge between the European Central Bank (ECB) and the US Federal Reserve (Fed). The ECB kept interest rates unchanged in December 2025 and signaled they are likely to remain on hold for an extended period. ECB President Christine Lagarde noted that heightened uncertainty makes it difficult to offer clear forward guidance on future policy decisions.

(This story was corrected on January 5 at 02:55 GMT to say, in the first bullet point, that the EUR/USD depreciates on safe-haven demand instead of rising.)

Risk sentiment FAQs

What do the terms"risk-on" and "risk-off" mean when referring to sentiment in financial markets?

In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.

What are the key assets to track to understand risk sentiment dynamics?

Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.

Which currencies strengthen when sentiment is "risk-on"?

The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.

Which currencies strengthen when sentiment is "risk-off"?

The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.

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