Are We Watching the Dollar Break? | Andreas Steno Larsen | Macro Mondays

0:00Hey guys, before starting this show, I just want to take a minute to talk about our good friends over at Bitwise, the$10 billion global crypto crypto asset manager. On this show, we talk a lot about all the big stories. What's driving markets? What does the data tell us? What are you people missing? And as you already know, crypto is playing a much bigger role in macro. So it's becoming more and more important to really understand the stories driving crypto. Why is Bitcoin going up? Why is Bitcoin going down? What are the institutions doing? What are people missing? That's why Bitwise launched the weekly CIO memo, a quick summary each week of what's really moving crypto markets.

0:33It's written by their CEO, Matt Hogan. And that's one of the best in business at bridging the worlds of traditional finance and crypto. It's really a great read. It's clear, it's bold, and it's very thoughtful. I highly recommend it to anyone who wants to do the latest insights and hardest takes in the crypto world. So head on over to bitwiseinvestments.com slash CIO memo. That's bitwiseinvestments.com slash CIO memo. Check it out for yourselves. Always, of course, carefully consider the extreme risks associated with crypto. Hi, everyone. I'm Raoul Pal, the CEO and co-founder of Real Vision. Here at Real Vision, we're committed to give you the best knowledge, tools, and network to help you succeed in your financial future.

1:11If you're enjoying this podcast, please take a moment to give it a five-star rating. It truly helps us continue to bring top-tier content. Thank you so much.

1:29Hey, guys, and welcome to Macro Mondays. I'm Andreas Denow and I'm all by myself this week as my usual partner in crime, Mikkel Rosenwald, is traveling London today. We have a great week ahead of us and the market action already today is very telling in many ways. We've had rumors over the weekend around Powell being laid off by the Trump administration. we've had news coming out around the terrorist wall and so on and so forth so i'd like to start with a brief guided tour around what's going on across assets today and please keep your questions coming no matter whether you're watching on the real vision app on youtube on twitter um The questions are open, and I'm open to discussions around some of the conclusions that I'll make today, because they're not always vanilla.

2:34First up, let's have a look at this discussion around Jay Powell, because it would be a tremendously volatile event should Donald Trump decide to lay off Jay Powell. and first of all can he lay off jay powell well on paper not really um and you know when trump got this question late last week during a press conference he said something like okay if i wanted to get him out he would be out quickly uh and the way i read that is that you know if a president really wants you out, maybe it's a good idea to pack your bags and leave. And that's one way of getting rid of Jay Powell. Another way of getting rid of Jay Powell in a de facto way is to ensure that you have a, quote unquote, shadow fit chairman in the board already now.

3:41And we know that Jay Powell's term ends in May 2026. And the Treasury Secretary, Scott Besant, already told the media that they're planning on some sort of application process starting or commencing already just after the summer. So let me put it like this. What if they appoint someone from May 26 onwards already very soon? And what if they pick someone who's already on the board? My guess would be Chris Waller, especially given the reaction function that he painted for the Federal Reserve given the terrorist war just last week. He was much more accommodative of the terrorist policy in his policy view.

4:29So if they appoint him, let's just take that example, already now and say he's going to succeed or be the successor of Jay Powell in May 2026. It basically means that you already have a new chairman on the board, right? Just de facto or a shadow chairman. And I think that would be a game changer for the Powell position, basically, of Jay Powell. If you look at Jay Powell and the voters over the past couple of years within the Federal Reserve system, most of the governors, also the external members, they voted together with Jay Powell on right about everything, which is a fairly new phenomenon in the history of the Federal Reserve.

5:16They typically had a lot more internal fights. And this could obviously be one way of trying to, you know, it's almost like an internal hostile takeover of Jay Powell's presidency, in a sense, if they appoint a new chairman already now. So, no, I think it's very unlikely that Trump will lay off Powell in an old-fashioned way, but they have tricks up their sleeve to try and navigate this situation without laying him off. And I think that's basically what we should expect over the coming, say, two or three months. Hi, Raoul here. Listen, I think we've got until 2030 before the economic singularity arrives.

6:02Now, it might not be the exact date, but it's around then. So we have about six years to figure out how to unfuck our future. I've put together a report to help you called Prepare for 2030. It's going to help you take the first steps in that journey to make sure you're secure past 2030. So just click on the link below and start your journey now. On top of that, before we get to the market today, because it's very telling what we're seeing in markets now, also in relation to this discussion. on the Fed chairman. I think this tweet or this truth post from Donald Trump earlier is very important also to discuss because he basically listed a whole range of non-tariffs-related barriers for trade.

6:53And when they initially came up with this semi-bizarre calculation on how to do reciprocal tariffs on the rest of the world, they kind of tried to accommodate for all of these non-tariff barriers. Currency manipulation. Do note that it's number one on this list. Very important to note. VAT or sales tax across the globe. Dumbbing. Protective standards. The list is long. It's very difficult to come up with a formula to include all of these seven, eight, yeah, non-tariff cheating points. But I think there is value in reading this list from the top to the bottom. So we know that Trump and his team is already negotiating with Japan.

7:42We know that they're negotiating with South Korea most likely as well, potentially Vietnam. So some of the countries around China. And what we know right now is obviously also that the terrorist wall is very centered around China. They also added to this wall by a new costs for Chinese ships docking in the US last week. China made a few counter moves by, for example, prohibiting their private equity firms to invest in the US. So it is now both a terrorist war and some sort of light capital war. And one thing that is, to me, almost crystal clear from the Trump administration's policy guidelines surrounding this is that the dollar needs to weaken to get these balances back in sync, basically.

8:38That is what Scott Besson wants. That is what Trump wants. That is what Peter Navarro wants. That is what Stephen Mirand wants. So, you know, all of the, you know, key lieutenants are on board this dollar plan. and last week whether it's true or not I don't know but Wall Street Journal basically reported that there is some sort of internal fight ongoing between Peter Navarro and Scott Besant basically they have deferring views on how to solve this trade mess Scott Besant is much more benign on tariffs compared to Navarro but Navarro can agree with Scott Besant that a weaker dollar would balance the trade balance to some extent at least with the rest of the world since it will become easier for the US to export and harder for the counterparts to do so.

9:32And for Scott Besant, the weaker dollar provides the backdrop needed to ease financial conditions globally, which is basically what he wants out of this, I think. So there is some common ground there. And I even think, but now I'm thinking out aloud, that China could accept such a dollar accord with a weaker dollar in return for some concessions on the geopolitical picture, whatever it is. So, you know, all roads lead to a weaker dollar right now. I think that's basically the main takeaway from the weekend of tariff news. And judging from the price action today, it's basically what we're seeing across markets as well.

10:15Let's have a look at gold first. And, you know, this price chart from Bloomberg is, I don't know, 60 or 90 minutes old when I updated it just before this weekly call. And, you know, we've seen a move in gold even since. So it is, you know, it almost looks exponential, this chart, if you look at the gold price since April of 2024. And it's been an accelerating trend, say, the past three, four weeks.

10:46Have you ever wanted to trade Bitcoin but haven't dared try? With Plus500 Futures, you can trade crypto without the hassle of opening a wallet. With just a few clicks, you can register and start practicing with their free and unlimited demo. See a trading opportunity? You'll be able to trade it in just two clicks. Feel ready? You can move to real money with as little as$100 once your account is approved. And the great thing is that in addition to crypto, Plus500 gives you access to a

11:40We'll see you next time. Trading with a plus. Due to this tariffs war being a very, very good story for gold. And why is that? Well, if there's a path to a weaker dollar, that's obviously good for the gold price since it's denominated in dollars. So it's kind of a protection against the basement of the dollar in that sense. It's also, you know, some kind of a hedge against tariffs. If you look at tariffs from a very practical standpoint, there is obviously the risk that you need to pay more to bring gold to the US. So we had that story, bringing up the gold price. There is also the risk that tariffs lead to very hostile capital wars between countries.

12:28that risk is also sort of hedged by gold, especially if you look at it from the perspective of, say, a high net worth individual or a family office. You want something that you can go and find in an extreme scenario. And this is not a paper position. It's not if you buy physical gold. And I think that's a value add in a sense here in a situation like the current. What about Bitcoin then, the digital gold? Also seeing a very interesting price action in Bitcoin, in my opinion. And we're maybe seeing the early signs of it, the coupling between Bitcoin and technology stocks in the US, which is something that, you know, it's been an ongoing discussion for, yeah, maybe a year or two, whether that could, you know, finally happen or not.

13:23And I think we're in the early innings of that decoupling right now. At least it looks like the same logic can sort of be almost tattooed to the Bitcoin case as the logic that I just laid out for gold to a large extent. You know what it is. It provides a hedge against the dollar debasement. and you have a degree of certainty that the system cannot just go and confiscate it in case of an extreme scenario unfolding. So I think that's why we see this price action in tandem. This is obviously also related to the very weak dollar that we're seeing. Again, today, we're seeing a weak dollar against the euro, against the Japanese yen, against most peers, actually.

14:18And maybe this is also related to all of the discussions ongoing around the dollar as a reserve currency. Could this strategy of Trump and Peter Navarro, Scott Besant, alter the trend in a sense around the dollar as reserve currency? Remember that this show is always a sneak peek into the institutional quality research that we provide instead of research and at Real Vision for the pro macro subscribers. I've written a whole article on this topic today and also how to deal with it in your portfolio. Loads of value-add in alpha in that article, so go and have a look. The dollar exchange rate is down again today.

15:00If you look at it technically here on the chart, basically over the past five years or so, it seems like we've broken a really, really interesting level, technically speaking, here. and the question is now whether there's any merit to the story that we're seeing central banks for example but also institutions outside of the official institutions moving away from the dollar and into euros japanese yen gold bitcoin etc on the back of this and i think there are some early merits this. We don't have the data from the official institutions from March and April yet. We have data up until February. We got that data last week, and it didn't provide any clues on whether they were selling US treasuries and dollars to buy gold, euros, etc.

15:54But if you look at the price action again today, it is a price action that kind of supports this storyline. look at it in very simple terms if the dollar sells off and u.s treasuries sell off at the same time then it is probably driven by global central banks moving away from the dollar to some extent into euros because at the same time as we've seen this weak dollar and weak price action in dollar-denominated bonds, we've actually seen an okay price action in, for example, German bunds. And I think that's telling because it kind of matches the logic underlying what I just laid out with central banks moving from one currency to another.

16:47Because if you're a central bank reserve manager, if you hold dollars in your reserve, you would typically park them in treasury instruments. But if you hold euros, you would typically park them in, say, German debt instruments instead. So if they sell dollars, they also sell US treasuries to some extent. And if they buy euros, they also buy German goods to some extent. So that would give you the exact price action that we've seen, say, over the past two or three weeks here. We've also touched upon the risk of China They're using this whole FX slash fixed income instrument as a light capital war against the U.S.

17:36to try and put pressure back on the Trump administration. And from what we could gather from this Wall Street Journal story last week, it seems like Scott Besson and Howard Lutnick are very aware of these potential adverse effects on the U.S. Treasury market, on dollar-denominated debt markets, etc. etc and brian if i can get you to flip to the u.s treasury chart just above it is kind of nasty to see bond yields going up at the same time as you're seeing the dollar going down and it is incredibly rare that we have this price action in tandem you know typically we would see the dollar trading much stronger when you have dollar bond deals going up, basically what we've seen over the past couple of years.

18:29But now we're seeing a divergence between the two, which is something that, you know, it looks almost semi reminiscent of a light EM crisis. This is what we've seen in the UK. Sorry for connecting the dots between the UK and an American market, but the gilt market and the sterling has been through a couple of these periods over the past couple of years. We've seen it in Brazil. We've seen it in other large EM countries that a currency crisis can to some extent end up as a fixed income crisis as well, and ultimately a crisis for the local capital market, Obo. so what scares me a little bit about this is that it is probably to some extent related to foreign capital losing trust in the dollar denominated market to an extent you know what's very different from from the sterling crisis that i described from a few years back is that we're talking about the reserve currency of the world here uh and it's not crystal clear to me whether there even is an alternative to the dollar from this perspective you need a whole list of prerequisites to be fulfilled before you can you know feasibly talk about being a reserve currency and the dollar is the only one with the check mark in front of each of them.

20:08But the risk here is that for the first time, at least during my professional career, it's getting pretty normal, pretty vanilla to question the credibility of the dollar outside of the US. We've really seen that being a topic over the past, say, month or two. And I've never really seen it to any serious extent. It's always been out there, this story. Could this happen at some point? But now it's actually happened. And for those of you who've read the stuff that Stephen Miran, who's basically the chief economic advisor to Trump, has put out on tariffs, the dollar, the global reserve currency status of the dollar, and all of that, it's very linked to what the famous analyst Sultan put out, I think it was in 2024, and labeled the Mar-a-Lago Accord.

21:06And I have a cartoon from one of the global cartoonists trying to, you know, give us a little smile on our face given this situation. I know it's not funny always, but the Mar-A-Lago Accord is basically an accord that to some extent links weakness in the dollar to foreign buying of U.S. treasuries in return for the sort of geopolitical security umbrella of the U.S. defense system. so in layman terms what this accord suggests is that okay japan will make sure to spend money on securing you if you allow the dollar to weaken versus the japanese yen that's what's going on right now but you need to also buy treasuries in return for this and right now it seems like this situation is firing a little bit out of control for the Trump administration because they're getting the dollar weaker, which is what they want, but they're not seeing the foreign buying of US treasuries that they would like to see in conjunction with it.

22:27And I think that is slightly discomforting as an investor to see this disconnect, especially since it's not part of the plan. It seems like something is not going according to plan here. And we're also yet to see any deals being signed on this. I think Japan will be the first one. We know that they will have negotiations again this week with the Trump administration. We know that this foreign exchange policy is one of the key topics during these discussions. And we also know that the Japanese inflation is above target. So they probably accept a stronger currency at least in a year now. So again, the more I think about it, the more I get to the bottom of this story and what's unfolding right in front of me.

23:21I think we're maybe seeing a seismic shift here in terms of the attractiveness of the dollar. And I think there's a risk of a controlled debasement spiraling into some sort of more extreme debasement of the dollar here over the next six to 12 months. And I'd like to bring up a question from Ben Businowski in relation to this, because I don't know whether you can find it in the meantime, Brian, our producer, but Trump tweeted something about he who has the gold makes the rules in relation to these negotiations. There you go. And sorry, Ben asks me, you know, what does this actually mean? You know, does it refer to physical gold?

24:11Or is it more like, you know, he holds the gold in a more, you know, indirect way? And I honestly, I don't know then. But before Trump turned into a Bitcoin slash Ethereum slash crypto proponent, he was certainly a gold proponent. You know, try to look up his stuff on YouTube from the 90s and the zeros. He talked a lot about gold and talked a lot about the gold standard and stuff like that. You know, so to me, it just underpins the current narrative in gold. I'm not sure whether I need to read between the lines in this tweet. There's certainly a potential case there. but without any doubt Trump is a big big gold guy and also a proponent of gold as some sort of hard currency backing the system at least historically was that now he's kind of more of a mix between gold and non-fiat digital assets it's a very good question and thanks for bringing that up for the week ahead outside of watching these Japan negotiations and whether we end up with a deal that brings the dollar in a weaker direction versus the Japanese yen.

25:28I think that would be, you know, just another clue underpinning everything I've said in this show today. We also have the PMIs coming up on Wednesday, not the ISM PMIs, but the Standard & Poor's PMI. And that PMI is typically not watched a lot by market participants because it's the, you know, second most important after the Institute of Supply Management PMIs. but this week I think is very, very important. Have a look at this chart, page 10, Brian, on the US ISM PMI. So in some of the research that we've laid out on the current situation of our pro macro subscribers on Real Vision, we've compared April 2025 to March 2020, not because of similarities, between a pandemic and a trade war.

26:25But because of the reminiscence in terms of what's going on in markets, the dollar was also very weak initially in the pandemic lockdowns. Because of the shock to the demand side, this is a very one-off,

26:45policy-driven shock to the system, as was the lockdown, right? It was, here we go. In one goal, we had major shock to the system, and Liberation Day proved to be the same. Much larger tariffs and much bigger shock to the system than what most people had anticipated, including me, by the way. And if you look at various measures of uncertainty, various measures of decision-making through April, such as order books and stuff like that, everything has come to a standstill, which is typically what happens when you get such shock quite literally right okay what do i do now uh you need a few weeks before you take a decision basically and i think we'll see that uh in the pmis already coming up on wednesday and then also of course in the ism um manufacturing pm and so on so forth into the early innings of may so i wouldn't be surprised to see like a 5 10 index point move south in these PMIs, something that will make it, you know, almost obvious to Jay Powell that he needs to do something.

27:55And that's why I've compared his speech last week to the speech that Christine Lagarde, the president of the European Central Bank, gave, I don't know, a couple of days after the lockdown in March 2020. She said, oh, we're not here to solve this situation. and boom, the shock was there. She had to do something. And I think Powell will come to the same conclusion to some extent, even though he sounded like someone who wanted to be very, very patient just last week. A couple of data prints can change things quite quickly here. And I even think Powell went as far as quoting Ferris Bueller last week.

28:39I don't recall the exact quote, but it's something about life coming at you fast. And maybe that was some kind of a hint that he's aware that a couple of data prints here may be a non-farm payrolls report printing negative for April. I think that's, you know, you kind of clearly cannot rule that out. If we get such key figures, he will respond, even though he said more or less the opposite last week. So I still think that there's, you know, very decent chance that we'll get some a major easing out of this by the end of the day um and again it also boils down to a weaker dollar right if we get say something qe like or non-qeqe we've discussed these things endlessly here at real vision uh it speaks in favor of a dollar debasement and i think all roads need to dollar debasement now um if you want to check out exactly how we've positioned for this.

29:39Go check out the portfolios, the in-depth research in the pro macro tier, lots of alpha and value add in there, including the whole article I've written on this Ma Elago Accord and why all roads lead to a weaker dollar right now as a consequence of what's ongoing geopolitically. And that's the first one for me in the sense that geopolitics lead to a weaker dollar. Basically, you haven't seen it before, but that's what's happening right in front of our eyes right now. Thank you very much for tuning into this week's Macro Mondays. And thanks for the questions. I'll make sure to answer more of them in writing after this.

30:20And yeah, make sure that you check out our Pro Macro Insider Talk tomorrow. I'll talk to Raul Pal, the founder and CEO of Real Vision about the Mar-a-Lago Accord, about the dollar, about how to secure your portfolio against dollar debasement and all of that. It seems like all roads are leading to a weaker dollar and all roads also leading to the Pro Macro Insider Talk tomorrow for our subscribers here at Real Vision. Thank you very much for joining us today. And we'll see you again next Monday with Michael Wolfenwald back joining me in the studio. If you liked this episode, I'd love for you to head over to realvision.com forward slash join for a free membership.

31:00Start your journey today to unfuck your future. Just one click away.

31:30Plus 500 gives you access to a wide range of instruments, S &P 500, NASDAQ, gas, and much more. Explore equity indices, energy, metals, Forex, and beyond. With a simple and intuitive platform, you could trade anytime, anywhere. Experience the fast, accessible futures trading you've been waiting for with Plus 500. With over 20 years of experience, Plus 500 is your gateway to the markets. Visit us.plus500.com to learn more. Trading in futures involves the risk of loss and is not suitable for everyone. Not all applicants will qualify. Plus 500. It's trading with a plus.