00:00 Speaker A
What in your view is priced into the dollar trade at this point? Obviously, we’ve seen some weakness here. Um again is the assumption there that we’re going to get multiple cuts this year and where is there room for maybe disruption of that view in the market?
00:27 Speaker B
Well, you know that the market is essentially thinking that you know through into 2026 we will get further Fed easing and you know a lot of that has already been priced in. Um I think what is perhaps more interesting for forecasters but equally very difficult to forecast is whether or not there will be sort of more implications of perhaps partisanship within the US systems. We did of course see the head of the Bureau of Labor statistics um lose a job last week um and of course with the the the Fed rolls coming up for reappointment that that raises or already has raised the issue of of Fed independence. So whether or not that will feed into credibility, whether or not that will have an impact on the dollar as investor confidence gets affected we have to wait and see. Now that is not our base case but certainly it is worth you know watching and and debating whether or not that does come through and into more of a market factor in in 2026.
02:35 Speaker A
Is there any real risk to the dollar status as a global reserve currency?
02:44 Speaker B
Well, it’s going to be impossible to to replace the dollar as as reserve currency. The the US capital markets are just so deep that that that they cannot be replicated. But, you know we heard from Lagarde head of the ECB in in May that you know she would probably want to chip away a little bit more at that. And and I think from the Chinese authorities well they’ve been chipping away for the last few years and and what I mean by that is that you know both of them will probably try and make more of their trade invoiced in their domestic currencies, not the dollar. And you know when we look at trade that is invoiced in a certain currency there is a rough correlation between those currencies, the invoicing currencies, and central bank reserves. So that the dollar is certainly um at risk of having its status eroded as it has been for the last 20 years. But of course the US Treasury will push back against that significantly and it’s quite possible that they want to see stable coins as as a means of of trying to push back. So again very interesting next few years I think on on that front.
