The main driver of US dollar strength over the past number of years was 'US exceptionalism'. That's meant stronger growth and higher US interest rates.
The stronger growth narrative is still in place -- even if it requires a deficit at 7% of GDP -- but Fed Chairman Jerome Powell has deconstructed the second part of narrative. His comments suggest the Fed won't tolerate a rise above 4.4% and that the FOMC plans to cut rates even with strong growth.
That's prompted a re-think in the market and some broad softening of the US dollar (at least until today).
DXY weekly
