bubble boi
Semiconductor Market Commentary, Thru Project Mascot
The dollar cycle has likely peaked because the Fed's next move is going to be a cut. Supply-shock demand destruction is doing the Fed's job and a strong dollar is doing the rest, so rates should fall, the dollar weaken, and duration assets, commodities and emerging markets reprice. A soon-ish end to the war should work against this view, but even if it drags on much longer, the rates curve has priced it in through the end of 2026. x.comÂ
The US dollar looks set for a multi-year bear cycle because a multipolar world needs fewer dollars. Reserve managers are diversifying, trade settles in more currencies and central banks accumulate gold instead. Against an equally weighted basket, the dollar's half-century sequence of lower secular highs is topping again on its 7-to-10-year cycle. Every major commodity bull of the past century ran alongside a falling dollar, which could also bring a second inflation wave. x.comÂ
The dollar's longer-term prospects are very negative: 2008 showed the dollar-based system was built on quicksand, and 2026 showed the US has lost its leadership of the Western-oriented world. Both are very positive for gold. First, though, the dollar might rise on a flight to liquidity. x.com x.com x.comÂ
The US dollar should strengthen because rates now price a full Fed hike within the next 12 months. That bid for the dollar would pressure commodities, crypto and long-duration risk assets. The view changes if Fed chair Kevin Warsh clearly signals unwillingness to hike, which he might. x.comÂ
The dollar looks set to sell off into CPI, with Treasury Secretary Bessent likely to step in again on a cool or in-line print. @Barchart notes the dollar has already wiped out the July 31 Treasury intervention. Follow-through intervention, selling into a weak tape, is well documented back to the 1998 Asian currency crisis, and with it hovering close enough to 160, further intervention makes sense. x.com x.comÂ
Early Treasury buying is mostly domestic, so falling rates can coincide with a falling US dollar. Foreign buying is expected later in the bust, when the dollar should reverse sharply higher; this does not bring the previously forecast dollar rebound forward. x.comÂ
The US dollar remains an easy long as the Fed turns hawkish, since the only way to control prices now is on the demand side, and that means rates go up. Kashkari's latest comments raise the question of whether the Fed has learned its lesson or is drifting toward Team Transitory 2.0. x.comÂ
The US dollar is unlikely to break out in the short term without a catalyst. An in-line PCE print pulled down 2-year and 10-year Treasury yields, the dollar index sits at major resistance at its May 2025 high, USD/JPY at 162 is a critical level for the Bank of Japan to defend, and currencies move slower than bonds. A reopened Strait of Hormuz would also help Europe and the euro recover, adding pressure; that favors short-term longs in gold and emerging markets. x.com x.comÂ
The US dollar should weaken because the US government wants a weaker dollar to increase manufacturing competitiveness and relieve global stress from a strong dollar. x.comÂ
The US dollar is supported by hawkish comments from Fed Chair Kevin Warsh, which led traders to sharply increase bets on a rate hike as soon as September. The Dollar Index trades around 99.6 after a sharp rise in the previous session. x.comÂ
The US dollar faces debasement because papering over the debt burden requires destroying its purchasing power to reduce debt-to-GDP. With no new buyer for US debt, bond rates will keep climbing: debt is $40 trillion versus $5 trillion in 2007, with a $2 trillion annual deficit and debt at 123% of GDP. Getting rates back to 2.5% would require a complete financial reset that destroys the dollar and inflates debt away; otherwise rates will climb to 6-9% in the short to medium term. x.com x.comÂ
