Why would you expect the dollar to strengthen due to the current instability when it's done nothing but show you a heavy sell-off during the most unstable policy environment in years?
Maybe you should look outside the obvious playbook and understand what's going on with capital repatriation as a result of US foreign policy, how the fiscal in Germany most likely set the dollar top and how every single country of each currency in the DXY is has been attacked or criticized by the POTUS in one form or another.
As I have wrote about extensively tariffs almost always tend to lead to strength in the dollar, and broad devaluation literally almost every single time from T+0-T+100 dollar strengthens mean increase roughly around 200bps. Could this time be different sure, and was dollar over extended definitely.
As for nothing but show heavy sell offs don’t think you can take 1 and say this and extrapolate that out into the future. This as mentioned was the 3rd largest sell offs since the GFC and the proceeding two times had very different catalysts that lead to that.
As for capital repatriation where and how are we measuring that? Net foreign investment % capital account isn’t weakening actually rising as a % of the capital account.
Just look further at growth differentials in the G7 us leads by a pretty wide spread, and that resilience should also drive flows into the USA.
Look at anticipated rate differentials. Look at how data has come in over the last two years relative to Europe and Canada etc.
Now never in the post did I say that the USD is going to lead to a broad base strength but essentially highlighted that if data surprises are strong and the uncertainty fades it could breadth some life back into the dollar.
Which means current sentiment might be caught offsides as it was when the EUR rallied last week.
But just don’t agree with heavy capital repatriation or this being sustained. Capital flows aren’t baring out that thesis you have been any measure.
Final point was this is about tactical trades, I think looking for set up’s we could see some slight dollar strength but never should be inferred I’m meaning ATH.
Saying tariffs lead to a stronger dollar is looking at consensus and ignoring the specifics of what is going on. I think it’s pretty remarkable that you cannot see the gravity of what’s taking place in Washington, but I’m not sure what worse, ignoring the obvious or thinking a four standard deviation move in two days in Fiber doesn’t tell you all you need to know about directionality or even whats taking place regarding foreign interest in US dollars. Unless you’re scalping or waiting to take advantage of the vote in the Bundestag next week, I don’t see the point of saying they’re tactical trades; the supply and demand imbalance is pretty clear.
Saying that tariffs lead to a stronger dollar isn’t just consensus—it has been empirically proven through countless studies. Econometric studies utilizing vector autoregressions, general equilibrium models, and more have all demonstrated that tariffs, in fact, lead to a strengthening of the USD.
You mentioned what’s happening with demand for the dollar, but I’ve highlighted what we are seeing with capital flows, which is actually the opposite.
Scalping could be argued as being no different from taking a tactical trade, as both involve looking at short-term price fluctuations.
The EUR moved today, sure, but the euro seems fairly underpinned for the time being, given the uncertainty around policy, as highlighted in the post on the EUR.
I always enjoy people challenging the thesis, and you very well might be right. I might be blinded by confirmation bias based on what I’ve observed in FX markets.
However, even if we look at what happened with the CAD today, with a 50% impact on aluminum and steel, I find it hard to say that “consensus,” as you’ve put it, hasn’t been right.
This revision smooths out the phrasing without altering your core points.
Why would you expect the dollar to strengthen due to the current instability when it's done nothing but show you a heavy sell-off during the most unstable policy environment in years?
Maybe you should look outside the obvious playbook and understand what's going on with capital repatriation as a result of US foreign policy, how the fiscal in Germany most likely set the dollar top and how every single country of each currency in the DXY is has been attacked or criticized by the POTUS in one form or another.
As I have wrote about extensively tariffs almost always tend to lead to strength in the dollar, and broad devaluation literally almost every single time from T+0-T+100 dollar strengthens mean increase roughly around 200bps. Could this time be different sure, and was dollar over extended definitely.
As for nothing but show heavy sell offs don’t think you can take 1 and say this and extrapolate that out into the future. This as mentioned was the 3rd largest sell offs since the GFC and the proceeding two times had very different catalysts that lead to that.
As for capital repatriation where and how are we measuring that? Net foreign investment % capital account isn’t weakening actually rising as a % of the capital account.
Just look further at growth differentials in the G7 us leads by a pretty wide spread, and that resilience should also drive flows into the USA.
Look at anticipated rate differentials. Look at how data has come in over the last two years relative to Europe and Canada etc.
Now never in the post did I say that the USD is going to lead to a broad base strength but essentially highlighted that if data surprises are strong and the uncertainty fades it could breadth some life back into the dollar.
Which means current sentiment might be caught offsides as it was when the EUR rallied last week.
But just don’t agree with heavy capital repatriation or this being sustained. Capital flows aren’t baring out that thesis you have been any measure.
Final point was this is about tactical trades, I think looking for set up’s we could see some slight dollar strength but never should be inferred I’m meaning ATH.
Saying tariffs lead to a stronger dollar is looking at consensus and ignoring the specifics of what is going on. I think it’s pretty remarkable that you cannot see the gravity of what’s taking place in Washington, but I’m not sure what worse, ignoring the obvious or thinking a four standard deviation move in two days in Fiber doesn’t tell you all you need to know about directionality or even whats taking place regarding foreign interest in US dollars. Unless you’re scalping or waiting to take advantage of the vote in the Bundestag next week, I don’t see the point of saying they’re tactical trades; the supply and demand imbalance is pretty clear.
Saying that tariffs lead to a stronger dollar isn’t just consensus—it has been empirically proven through countless studies. Econometric studies utilizing vector autoregressions, general equilibrium models, and more have all demonstrated that tariffs, in fact, lead to a strengthening of the USD.
You mentioned what’s happening with demand for the dollar, but I’ve highlighted what we are seeing with capital flows, which is actually the opposite.
Scalping could be argued as being no different from taking a tactical trade, as both involve looking at short-term price fluctuations.
The EUR moved today, sure, but the euro seems fairly underpinned for the time being, given the uncertainty around policy, as highlighted in the post on the EUR.
I always enjoy people challenging the thesis, and you very well might be right. I might be blinded by confirmation bias based on what I’ve observed in FX markets.
However, even if we look at what happened with the CAD today, with a 50% impact on aluminum and steel, I find it hard to say that “consensus,” as you’ve put it, hasn’t been right.
This revision smooths out the phrasing without altering your core points.