The loss of dollar dominance

I have written that the dollar decline is significant, but the fall only places the current dollar value near the long-term average. However, we need to acknowledge the extreme moves in the dollar over the last six months. The reason for the dollar decline is truly self-inflicted on the part of the US.

The dollar decline is not driven by systematic factors that would have been picked up by a quant model. The trend/momentum would have called for a short signal, but the exogenous factors have not been seen in past data. Growth in the US is not below the rest of the world. There is the threat of a recession, but the numbers do not suggest lower relative growth. Inflation is still higher than desired, but again the numbers do ot suggest a dollar decline. 

The three areas of concern are uncertainty, trade, and debt. Usually, higher uncertainty will lead to a flight toward safety, but in this case, the uncertainty is with the US. The trade and tariff issue is real, but we lack sufficient evidence of past tariff changes to accurately determine the correct dollar response. In the case of debt, there is clear evidence that large deficits will impact currency demand. Here is where the problem is centered, and there is no clear solution. The current deficits will not be solved with the budgets being suggested. There is a potential credit crisis with the dollar.