At Any Rate Global FX: FX after the tariff reset
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May 16, 2025 Explore the intriguing world of foreign exchange as strategists unpack the implications of recent tariff de-escalation on market dynamics. Optimism returns as the dollar fluctuates alongside shifting fiscal policies. Discover how new tax legislation impacts economic growth and currency outlooks, especially for the Sterling and Australian Dollar. Dive into the latest UK GDP data, revealing its bearish effects on currency trends, and get insights into the intricate relationships between data surprises and central bank risks.
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Trade Policy Shocks Impact FX
- The FX market has faced multiple major inflections in trade policy this year, causing ongoing surprises to traders.
- Recent tariff rate normalization brings optimism, but many risk factors seem priced in already, complicating tactical moves.
Dollar Bear Case Persists
- The US dollar rallied initially on tariff de-escalation but broader dollar bear arguments remain valid.
- The global flow dynamics and US growth moderation will continue to pressure the dollar over months and quarters.
Dollar-Rate Correlation Normalizing
- Post tariff de-escalation, dollar's correlation to rates is normalizing, signaling a return to data-driven FX trading.
- This implies less policy risk and a shift back to economic fundamentals in market behavior.