Trump's 'Big, beautiful Bill' holds back USD while data points to minimal tariff damage

Matthew Ryan, CFA Ebury

The sell off in Treasury markets amid fears surrounding the President’s “Big, Beautiful Bill” is keeping the dollar down, in yet another reversal of currency correlations that had held for decades.

On the positive side for the greenback, economic data shows little tariff-related damage, and now even business activity surveys, including last week’s composite PMI from S&P, are normalising.

We’re also not seeing any signs of a deterioration in the labour market, with recent jobless claims figures not pointing to mass layoffs in the US economy.

Paradoxically, sharply rising tariff revenue is providing the only positive fiscal news.

The latter, together with sharply higher US Treasury yields and a very one-sided market where positioning data shows that speculators are significantly short the dollar, may provide some short term relief for the currency, but the longer trend is probably down.

Author

Matthew Ryan, CFA

Ebury

Matthew is Global Head of Market Strategy at FX specialist Ebury, where he has been part of the strategy team since 2014. He provides fundamental FX analysis for a wide range of G10 and emerging market currencies.

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