The US dollar has strengthened further against most global currencies since the end of 2024, driven by the narrative of US exceptionalism and the potential impact of President Trump's tariff policies. The trade-weighted real US dollar index is now at levels not seen since Paul Volcker was Chairman of the Federal Reserve back in the mid 1980s, which was a period marked by high inflation and high interest rates.

During the Volcker period, the strong dollar led to the emergence of significant trade imbalances, as US exports became increasingly expensive and imports to the US became increasingly cheap. To address these imbalances, in 1985 the US and several other major industrialised economies agreed to take coordinated action to devalue the dollar under the terms of the Plaza Accord, leading to a subsequent period of dollar weakening. As Trump negotiates new trade deals, there is now similar potential for the dollar to weaken, as the US administration aims to boost demand for US exports.