The greenback just can’t catch much of a break

The dollar has stabilised overall this week amid continued uncertainty around US trade policy and questions around the fiscal package that is still working its way through Congress. Market participants appear increasingly to be looking through the latest twists and turns on the trade front, including this week’s court ruling (now suspended) striking down most of the Trump administration’s tariffs. But the greenback remains near the lower end of its post-2022 range and considerably weaker than interest rate differentials would imply.  Relatively hawkish FOMC minutes and continued solid US economic data this week have not given the dollar much of a boost. We expect another decent US non-farm payrolls print next week and further rate cuts accompanied by relatively dovish messages from the ECB and the BoC at the respective policy meetings. While that ought to help the dollar, sentiment around the greenback remains negative and it continues to look vulnerable to further bad news on the fiscal and trade policy fronts.