From Goldman:
Markets are worrying over the “true” intentions of the new administration. Concern that President Trump is mercantilist and may talk down the Dollar has seen the Dollar fall notably below the 2-year rate differential, as markets have priced a protectionist risk premium.
Our last FX Views argued that this decoupling is unlikely to last, given that the correlation of the Dollar with front-end differentials is one of the more stable relationships out there.
