Sabotaging the US Dollar

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Subscribe nowWe’re only a handful of weeks into the new US administration, but it feels like six months in terms of news flow. People talk about dog-years moving at 7x the rate; Trump-years seem even greater. Consuming policy announcements (and pivots) is like drinking from the firehose, and what’s been coming through isn’t as bullish as markets had anticipated. The first Trump administration taught his critics in the market that it’s unwise to bet against the US with him at the helm. This time around, market participants were optimistic about lower taxes and deregulation and prepared to stomach (or cheer on) some pretty hard right politics. Those with a penchant for crypto were excited about what lay ahead, especially with Elon in the Oval Office. Immediately after the inauguration, I wrote about the USD, expecting that US exceptionalism would continue - at least for a short while. Today, I have a few more arguments against this view, and I want to explore them in detail in this note. I won’t talk too much about EM - but getting one’s big dollar call right is critical to making money in EMFX. I’m mindful that the half-life of any analysis right now is 24 hours, so I will present both sides of the argument.In this note, I’ll cover:What’s happened since the InaugurationThe case for USD strengthThe case for USD weaknessWhat’s happened since the InaugurationInitially, the USD pulled back after the inauguration as tariff policy was slow to emerge - particularly against China, and what we did get looked more aimed at gaining leverage. USD longs were reduced, and the market prepa…