“The next focus for markets is whether Trump pivots to a much more protectionist, isolationist policy, or he tries to play a little bit better in the global game,” said Mark McCormick, North America head of foreign exchange strategy at TD Securities.

Trump, in the past, has kicked off his own dollar selloff. Just before his inauguration, he discussed how he liked a weaker dollar, and the dollar index has lost more than 11 percent since then. A weak dollar is a double-edged sword— good for multinational profits and selling U.S. goods abroad but bad for U.S. dollar assets, like Treasurys.

“The tone we got this week was the dollar was front and center for Davos. You’ve had back and forth on Mnuchin and Trump and Mnuchin again on what actual dollar policy is. I think everyone’s fully aware Trump has had a preference for a weaker dollar, whether there’s anything they can do or not to accelerate it,” said McCormick. “It’s clear they have a focus on bilateral trade deficits.”

Trump did promote his ‘America first’ policies at Davos, and in a speech said that does not mean America goes it alone. He also said the U.S. was looking for fair trade, as he touted the growth of the U.S. economy, the stock market’s performance, the new GOP tax law and the fact that the U.S. is ‘open for business.’

“It’s the most important thing to watch,” said Nordvig of evolving U.S. trade policy. He said if NAFTA is dissolved, it would be an immediate negative for the peso but the dollar would lose flows to Europe and Japan. It would also be negative for the record setting stock market.

“We saw the solar stuff this week. It was expected. The next thing to watch is the next installment. It’s pretty unpredictable,” said Nordvig. U.S. officials have warned other actions are coming.

Alan Ruskin, Deutsche Bank head of G-10 currency strategy, sees some consolidation after the dollar’s fall and the sharp increase in the euro, up 1.7 percent this week. But he too says the markets are keeping a close eye on trade, and whether the Trump administration makes moves beyond the actions its already taken on specific products.

“What we’ve been looking for is a shift back to the point where rates matter and carry matters. So far, we haven’t seen that for quite some time. There are a lot of different balls in the air, as far as currencies are concerned,” said Ruskin. “There’s trade related issues coming to the fore now, particularly as they relate to the U.S. and China. This is an opening gambit. There’s a bigger story in the background.” Ruskin said the market is watching the U.S. trade relationship with China, and the fact the U.S. has significant issues with China, including on intellectual property rights.

Nordvig said the currency market has been making some interesting moves when it comes to China. “

“What’s really remarkable, in the last month we’ve had a big move in the dollar. We had a big move in the dollar against a lot of crosses. China had a big move, and we track the invention and thers’ no intervention whatsoever. This is alike a historic thing because they used to always intervene when the currency was getting stronger. The fact they are not doing anything is a very big deal,” he said, noting countries are very careful now about being interventionalist. “I think they realize if they want to have a reserve currency over time, they want to have a flexible currency. If they stop their appreciation, there’s one way risk. It can only go down. I think they want to have two-way risk.”

As the dollar flounders, the market has focused on the fact that other currencies, like the euro and yen are becoming more attractive as reserve currencies, though the U.S. is so important it is not expected to lose its reserve status.

But the concern has been that dollar assets could lose their appeal if the dollar becomes too weak, if the Trump administration really does want to talk down the green back. McCormick said there was some speculation that the Trump administration weak dollar comments were a response to the reports earlier this month that China was considering cutting back on Treasury purchases because they are no longer as attractive and because of Trump trade policies. China is the largest holder of Treasurys, but it’s not expected to back out of the Treasury markets in a significant way.

“I think if they started to pick a trade war with China that would be super dollar negative against euro and yen. But high beta currencies, like emerging market currencies , would also not perform well in that environment,” McCormick said.

He said NAFTA is a test case for how the U.S. may behave on the broader world stage. “It will be interesting to see how Trump goes back home to a different audience, how he talks on trade whether he is more bellicose,” said McCormick, adding the upcoming Congressional midterm elections may shape how Trump talks about trading partners.

Trump gave a surprise nod to the possibility of U.S. joining a multilateral trade deal when he has pushed the idea of bilateral deals when he said he reconsidering joining the Trans Pacific Partnership. Trump withdrew from the multilateral trade pactlast year and says he’d reconsider if the U.S. could get a better deal, but analysts were skeptical anything would come of that.

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