The real world is changing and so is the world of FX.

There was a time when if you had a 1.4% drop in the S&P 500, the US dollar would be much higher against everything but the yen and Swiss franc. That’s not the case today as it’s lower against the euro/pound and only marginally higher against the commodity currencies.

What’s changed?

Tariff headlines in Trumps first term and earlier this year boosted the dollar but now they don’t. I believe this is largely about signaling. In the past, the market was confident that Trump’s top priorities were boosting the stock market and GDP. That faith is broken.

Instead, the White House has increasingly signaled that it’s willing to ‘detox’ or take short term pain to reach long term goals like decreased government spending or re-shoring manufacturing. The market doesn’t like it and sees to result as a weakened US economy relative to the world.

This isn’t historically unique. The US dollar also suffered early in the housing/financial crisis and slumped after 9/11 and the dot com bust.