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DOLLAR WEAKNESS CATCHES SOME OFF GUARD

"Regime shift for the dollar?"

"Dollar Wreckoning"

"The beginning of the end for the US dollar?"

"The end of the dollar as we know it?"

"How painful can it get?"

These are a selection of headlines from recent research reports on the U.S. dollar, after Trump's tariff to-and-fro over the last two weeks.

It's fair to say, analysts are struggling to judge what the Trump administration's trade policy means for U.S. assets, in particular, the U.S. dollar.

The dollar index <=USD, which measures the currency against six others, sank 3% last week and is down another 0.4% today, tumbling against safe-haven currencies, and most interestingly the euro.

"While we think this EUR rally will eventually end in tears, we are the ones crying right now," Citi admits, having been caught off guard by the move.

Longer-term, they believe the dollar will come out on top given the expected disinflationary shock to the EU and global manufacturing slowdown.

But, they note that there has been a sentiment to shift towards US assets which cannot be dismissed.

Barclays also didn't see the move coming but is not quite ready to go all in on the euro yet.

"Before we turn more fundamentally bullish EURUSD we would like to see price action with less microstructure-related noise and have more visibility into the cyclical shock outside the US," Barclays says.

Goldman Sachs, which flipped to a softer dollar view last week, says their conviction in a weaker greenback has increased.

"We think that the design and implementation of these tariffs should have a negative impact on the currency because they have contributed to eroding consumer and business confidence," GS says.

The biggest risk to their view, they say, is disruptive market moves that would bring a "dash for dollars".

"The 90-day 'pause' has mitigated that risk somewhat, and even made the path to Dollar depreciation a little wider," GS adds.

(Samuel Indyk)

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EARLIER ON LIVE MARKETS:

ARE WE OUT OF THE WOODS? CLICK HERE

EUROPEAN SOFTWARE: A SECTOR IN LIMBO CLICK HERE

BROAD GAINS LIFT THE STOXX CLICK HERE

BEFORE THE BELL: TECH CHARGES UP, LVMH KICKS OFF EARNINGS CLICK HERE

DOING THE TARIFF TWO-STEP CLICK HERE