After the tariff announcement, there was an initial USD drop on the risk that the US finds itself isolated, then a flight to the USD on risk aversion. Interestingly, our FX models, which have been bearish on the USD since the start of January, are broadly positive USD for April. In particular, reversing to short positions in AUD and NZD, which as commodity producers are most impacted by increasing recession risks. In the medium term, the USD remains vulnerable, with a weaker USD seemingly a policy goal for the Administration, but, as the shock of the tariff announcements work through the markets, the USD can have a period of strength first.
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