FX Weekly: Disappointment for the dollar in Trump’s first week back

The dollar is ending President Trump’s first week back in office on the backfoot. Between the absence of immediate tariffs in this week’s flurry of executive orders, Trump’s renewed attacks on the Fed, and some improved PMI surveys in Europe, the dollar bull narrative has taken a few hits. As we suggested last week, stretched positioning means the greenback is vulnerable to shifts in perceptions around the policy outlook in the near term. That said, Trump’s see-sawing on trade policy (and many other areas) was also a feature of his first term; there is every chance that he swings back into hawkish mode before long. We continue to expect that he will follow through and enact major tariffs in the first half of this year, and that the dollar will eventually rise to a new high later in the year.