FX Weekly: Taking stock of the euro’s epic rally

The dollar has suffered one of its largest weekly falls on record in the wake of President Trump’s latest tariff flip-flop, continued jitters around the health of the US economy and, most importantly, Germany’s historic fiscal policy shift. We have revised up our forecast for the ECB’s policy rate and the EUR/USD rate in response to the improved outlook for Europe’s largest economy. Given the sea change underway in European policy more broadly, the ongoing uncertainty around the US outlook and the administration’s ambiguity on trade policy, the dollar’s prospects look increasingly fraught.