Dollar has become a 'falling chainsaw' - what it means for you

• The dollar fell 9% in 2025 and over 2% in January 2026 alone, attributed to Trump's actions, foreign policy uncertainties, and massive public spending increases threatening budget deals
• For UK consumers, the stronger pound (above $1.38) benefits travelers to the US and reduces import costs, helping keep inflation down, but hurts UK exporters' competitiveness
• US dollar weakness cancels out investment gains for UK pension schemes with dollar-denominated assets, while making UK markets more attractive to American investors seeking alternatives to an AI-driven stock bubble

Market Summary: US Dollar Decline and Global Implications

Key Developments

The US dollar has experienced a dramatic decline, falling 9% against a basket of international currencies in 2025, with an additional 2% drop in January 2026. The British pound reached its highest level against the dollar since July 2021, trading above $1.38—representing a total dollar weakness of over 11% since President Trump's return to office.

Primary Drivers

Market analysts attribute the dollar's collapse to a "crisis of confidence" stemming from Trump's policies and threats since returning to power. Contributing factors include damaged foreign policy credibility, concerns over fiscal sustainability, massive public spending increases, and an impending government shutdown deadline on Capitol Hill. Declining consumer confidence data has amplified market jitters despite healthy US economic growth.

Additional pressure emerged from speculation about joint US-Japanese central bank intervention to stabilize the weak yen, though the dollar's decline has reduced expectations for such action.

Market Implications

For the US: A weaker dollar makes exports more competitive but risks triggering a sell-off of US Treasury bonds, potentially spiking borrowing costs globally. Trump publicly described the dollar's weakness as "great," suggesting deliberate policy to reduce trade deficits, though this comment triggered further declines.

For the UK: British travelers and importers benefit from stronger purchasing power, with reduced inflationary pressure on dollar-priced commodities. However, UK exporters face reduced competitiveness, and dollar-denominated assets in pension schemes have seen value erosion offsetting dollar gains.

Market Sentiment: Corpay's chief strategist Karl Schamotta characterized the dollar as a "falling chainsaw" that investors refuse to catch, with the "Sell America" trade dominating markets amid soaring economic policy uncertainty.