Back To A Positive Dollar-Stocks Correlation

The return of US-China trade tensions and US credit concerns over the past two weeks have been a key part of the price action in the Dollar and in risk assets (which virtually every bank had left for dead as recently as this summer).  

As Goldman's FX strategist Michael Cahill notes, "dollar underperformance on prohibitively large tariff announcements and on the emergence of credit concerns that are more domestic than global in nature" are both consistent with Goldman's frameworks on these topics." Ultimately, the bank sees good reason for both of these risks to prove to be more benign, and a more conciliatory tone from President Trump on US-China trade risks in particular has likely already played a role in the rebound in both US equities and the broad Dollar last Friday and this Monday.