Markets are pricing Trump volatility over macro indicators into the world’s reserve currency

It appears that the greenback has decoupled from economic fundamentals, morphing from a currency driven by growth and interest rates into one reacting to the volatility of the Trump administration, the Financial Times ’ Katie Martin argues in an opinion piece. A strange new economic reality for the world’s reserve currency is starting to appear, as while US growth forecasts climbed and bond yields remained elevated this year — all data points that should under normal circumstances point to a stronger USD — the greenback is down nearly 2% YTD against a basket of its peers.

Why it matters: For the UAE, Saudi Arabia, and the rest of the GCC, this is a direct threat to the stability of the USD peg. Because of their currencies being tethered to the greenback, they are effectively importing US political risk into the heart of their finances. As global asset managers now shift to maintain US stock holdings, while selling the USD, the Gulf could see its local purchasing power and fiscal reserves eroded by political drama all the way in Washington that has nothing to do with the economic health of the region.

Recently released US job data added to suspicions that macroeconomic reality and the currency are disconnected in a way never seen before. Despite expectations of a soaring USD following January job creation numbers that were double what they expected, the greenback remained flat. Summarizing this broader disconnect, Brookings Institution Senior Fellow proclaimed on his Substack that “We’re entering a new era. US growth will boom this year. But the USD will fall.”

But a weak USD is seen as a good thing by some in the White House, potentially including Trump himself, who described the USD reaching its lowest point in four years last month as “doing great” in comments to reporters. Some in the Trump administration, including Trade Policy Advisor Robert Lighthizer and to a lesser extent Vice President JD Vance, argue that a strong greenback has long dampened local manufacturing and export potential in the states.

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MARKETS THIS MORNING-

Asia-Pacific markets started off the week in the red, reacting to the Japanese economy missing growth expectations during 4Q 2025. The economy grew 0.1% during the three-month period, well below expectations of 0.4%, marking a reversal from the contraction recorded during the previous quarter.

The values in the table above are listed according to the market position as of 3:30pm IST / 2pm GST.