A US Dollar recovery that lacks a solid foundation

Recent Movements in the US Dollar

In my previous update titled “The Dollar feels heavy,” I discussed how, despite the Federal Reserve’s optimistic outlook on the economy and Treasury Secretary Bessent’s reaffirmation of the US’s commitment to a strong Dollar, the currency failed to gain momentum. This lack of response led me to describe the Dollar as “heavy.”

However, the situation shifted on Friday following the nomination of Kevin Warsh, which sparked a rebound in the Dollar and improved overall sentiment. Over the weekend, I pointed out that this uptick was less about Warsh’s nomination and more likely a reaction to a significant positive surprise in the Chicago PMI data. In fact, interest rates...