The Drill – When the Facts Change, So Do We
Greetings from Copenhagen.
The global macro landscape is shifting rapidly, with U.S. policy priorities evolving just as quickly. The administration is now 1) refocusing on the Middle East, 2) signaling that a Ukraine–Russia deal is inching closer, and 3) initiating currency policy discussions with Asian nations—many of which are active FX manipulators. All of this aligns neatly with Bessent and Miran’s broader strategic playbook:
- Weaken the USD to facilitate easier reserve accumulation by foreign central banks.
- Steepen global yield curves—especially in the U.S.—which makes longer-dated Treasuries more attractive to foreign buyers when hedged.
The bottom line: all roads lead to a weaker USD and higher long-end U.S. bond yields. That path likely begins with efforts to “depeg” Asian currencies from the dollar.
Post-COVID, one of the most reliable signals for commodity demand has been strength in Asian FX versus the USD. With that trend now in motion, the outlook for cyclical commodities is turning more bullish. A weaker USD combined with stronger-than-expected global growth bodes well for the commodities in general.
Chart 1: Asian FX vs. USD Is Typically a Reliable Indicator for Commodity Demand
The bearish commodity stance is running on fumes, as the key drivers—trade barriers, a short-term USD repricing, and slowing growth—are all beginning to reverse. We’re likely staring into multiple trend shifts across asset classes. Position accordingly.
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