FX Weekly: US dollar remains on edge

The US dollar is enjoying a strong end to the week thanks to signs of economic resilience in the latest US Employment Report but, for the second week in a row, the DXY Index is little changed on net. Such small consecutive weekly moves (up by ~0.2% last week, down by ~0.2% this week at the time of writing) are relatively unusual; and the net move over these two weeks marks this period as one of the dollar’s calmest in recent record.

This could be used as evidence that investors are increasingly looking through twists and turns on the trade front – and there probably is an element of that. But this apparent calm is also somewhat misleading: intraday volatility within these periods remains elevated on both a realised and option-implied basis. And far from being on steady footing, we think the greenback remains in a precarious spot. Our base case is still for a rebound in the US dollar over the rest of 2025 but it continues to look vulnerable to bad news on the fiscal and trade policy fronts.