The US dollar should be much higher. Why it isn't

In the past week, the US dollar is the second-worst performing currency after the pound.

Let's do a quick recap at what we've learned in the past seven days.

What's more, the US dollar is the worst performing major currency in 2017. Granted, some of that is a give-back from the Nov-Dec rally but starting from election night, the US dollar is a mixed bag outside of USD/JPY.

Why isn't the dollar higher?

The stock market clearly loves the everything about the election and Trump. He's promised tax cuts, less regulation, more spending and better growth. The 12.7% rally in the S&P 500 says the stock market believes it. Ten-year Treasury yields have also moved up to 2.45% from 1.82%.

Given all this, there's no question the US dollar should be higher.

Why isn't it? I believe that worries about the strong dollar policy are real and they're having an impact.

On top of that, I think there's an international divide. Domestic investors have decided they can live with Trump and the checks and balances in Congress.

International investors aren't so sure. To some extent, that makes sense because the tax rule changes might not be so warm to foreigners and protectionism might make them want to bring their money home.

So what we still see is a market that's trying to figure out Trump. Thursday's press conference was a strange performance but the market didn't blink. Even though he's petty and defensive, he still has good people working with him on legislation and plans. The thing is, one of those plans might be to weaken the US dollar.