Despite President Trump’s decision to jump the gun with tariffs on the auto sector this week (ahead of next week’s widely trailed announcement on 2nd April), the dollar is ending the week broadly flat on net. In part, that may be on account of the damage from these latest tariffs affecting not just foreign firms, but also the US auto manufacturers and their cross-border supply chains. More importantly, with US economic data continuing to disappoint (even before the effects of tariffs are felt in full) and the US stock market taking another dive, the case for continued US exceptionalism – and with it the strong dollar – looks ever more in peril. Our base case remains that the doom and gloom around the near-term prospects of the US economy has been a bit overdone – we expect next week’s payrolls data to have held up reasonably well. Between higher tariffs and a hawkish Fed, a rebound in the dollar is still on the cards for the next couple of months.
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