Sentiment is generally negative for the dollar even in the face of good news. The market is looking through the expected rate hikes. If you take away the interest rate support for the dollar... and the structural problem is still there, the trend for the dollar is downwards.
I think the market has got too pessimistic on interest rates,
Trade with Europe is being hit by the strength of sterling and the weakness of the euro. European exporters are winning market share at U.K. companies' expense.
At the moment it seems like a pretty ring-fenced issue and it doesn't look like it's going to spill over into the market at large, but any risk aversion resulting from problems with trading would be dollar negative.
The risk is that the deficit is rather worse than the market is looking for and if that's the case it may swing the focus back to structural dollar negatives and away from the interest rate focus.
It's almost exclusively the rate outlook driving things in the sense that at the beginning of this week the market was 50/50 priced for a third rate hike this year with two priced in with certainty, but as things stand now even a second hike is looking questionable.
The market seems to be taking a relatively long-term view of commodity prices, and the weakness we've seen in both oil and natural gas is very much a short-term phenomenon.
The M&A inflows have already been significant and I think there is potential for a lot more to come because the UK equity market is among the largest, relative to GDP, and among the cheapest at the moment.
The market is increasingly seeing a risk that the Fed pauses in its rate cycle -- not only that but also the peak in the interest cycle will be considerably lower.
The market is building in a risk premium because of the uncertainty surrounding the election -- once we get that out of the way, all other things being equal, the euro will probably bounce.