Benjamin Cowen breaks down why he believes the dollar is about to make a significant move higher, running against the popular narrative of continued dollar weakness.
Key Points
Key Highlights:
- The dollar's presidential term path under Trump's second term is tracking his first term almost exactly, bottoming early in the midterm year before trending higher into year end
- The dollar tends to follow the 2 year yield, and with the yield already bouncing harder than the dollar has, a catch-up move higher looks likely
- Energy stocks just hit new highs, echoing the pattern from 2000 and 2007 where energy topped well after the broader stock market, reinforcing the case that inflation isn't fully tackled
- Multiple countries including the Eurozone, Japan, New Zealand, and Australia have already started raising rates again, making a US rate hike increasingly plausible before year end
Takeaway If the Fed raises rates as expected, history from the 1990s suggests the dollar could get a sharp move higher even from just a single 25 basis point hike, likely acting as one final headwind for both Bitcoin and stocks before the midterm year ends.
