The positive news on trade deals continue to boost the US Dollar. This has more to do with positioning rather than fundamentals for now. In fact, the short dollar trade has been one of the most crowded ones and therefore it’s at risk of unwindings on positive news on the trade front.

USDJPY is now up more than 0.6% on the day as the positive risk sentiment weighs on the Japanese Yen. For the USD, there’s also a scenario where we could see a bigger upside move if very good outcomes on the trade front make the market to reprice interest rate expectations all the way down to just one cut for the Fed in 2025.

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