The dollar has become the bellwether for the Trump administration’s economic policies, but it’s unclear where the greenback will go from here.

Dollar strength has been one of the hottest topics since the election. With the winds blowing against a globalized economy, the dollar has become the weathervane of geopolitics and international economics.

After the election of Donald Trump, the dollar hit multi-decade highs against a basket of international currencies. The greenback strengthened throughout 2016 as the Federal Reserve tightened monetary policy. As U.S. Interest rates rose, American assets became more attractive to investors abroad.

Uncertainty in an uncertain world

But the dollar has given up some of the post-election gains. As Brian Chappatta of Bloomberg recently noted, Japanese investors have been net sellers of U.S Treasuries for two straight months – the first time that has happened since 2014. Chinese holdings of American debt are at a seven year low.

Chappatta argues that uncertainty has been the driver of this selloff. Political risk can affect even the biggest and most liquid market in the world. After all, it’s not every day our currency moves by the Tweet or off-the-cuff policy statement.

How could this impact the dollar? Foreign governments and investors could continue selling Treasuries, which puts downward pressure on the dollar. Investors like stability, but political uncertainty in America is here to stay.

What’s politics got to do with it?

The post-election dollar rally was driven by expectations of two policies: an infrastructure plan and corporate tax reform. If passed, each of these plans could lead to further dollar strength. But questions about each policy package remain.

A massive infrastructure package could strengthen the dollar. Big fiscal policy packages tend to increase the value of a currency as it boosts short-term growth. However, there isn’t any indication that the proposed $1 trillion infrastructure bill would pass through Congress. Senators like Elizabeth Warren and Cory Booker have been flying high as the leaders of the anti-Trump coalition – are they willing to give a gift to the Trump administration by passing his prized plan?

Corporate tax reform could also buoy the dollar. It could lead to more foreign interest in American investments. A border-adjustment tax could also lead to a big jump for the dollar. If a tax on Mexican imports is put in place, the dollar will simply strengthen against the peso. With a stronger currency, American companies buying Mexican goods wouldn’t actually pay more – even with the tax.

Where does the dollar go from here?

If all of the Trump administration’s policies are executed according to plan, the dollar is almost certain to rise.

But if political gridlock continues, the dollar could weaken further. As the dollar chart shows, this is how investors have bet since the December peak.

Ironically, the Trump administration has vowed to close the trade deficit. Perhaps the best way to achieve that goal is to hope for a Washington impasse, making the dollar weaker than it would be if tax reform and infrastructure are passed.