GM. This is Milk Road Macro, the macro newsletter that's got a sharper eye on the dollar than your uncle watching the gas station price board.

Here’s what we got for you today:

• ✍️ Why the dollar's move could shape everything next

• 🍪 US court rules Trump's global tariffs illegal

• 🍪 Nvidia CEO warns U.S. chip export curbs could backfire

WHY THE DOLLAR'S MOVE COULD SHAPE EVERYTHING NEXT

The dollar could be the most important market in the world.

Dollar moves can have massive impacts on global markets.

It could be viewed as “the ultimate leading indicator”.

It’s made some big moves lately.

And it might be about to make some more big moves here soon.

So what does this mean for asset prices like stocks, Bitcoin and gold?

And why is the dollar so important (is it being engineered lower 👀)?

Let’s take a look…

So, what’s happening with the dollar?

Since early 2025, the dollar has weakened massively.

As measured by the Dollar Index (DXY), the dollar has fallen by more than 10%.

This is a huge move for the world reserve currency.

And the speed and scale of the move has only been matched on a handful of other occasions over the past two decades.

But, how does the dollar affect asset markets?

A weakening dollar is often a positive for asset prices, while a strengthening dollar is often a negative.

For example, there is a strong short-term relationship between the Dollar Index (DXY) and Bitcoin.

But on a roughly three-month lag.

So if DXY is weakening - it’s often good news for Bitcoin roughly three months later.

And if DXY is strengthening - it can often signal bad news ahead for Bitcoin’s price.

If this correlation holds - it’s currently signalling higher for the price of Bitcoin in the short-term.

This inverse relationship can also be seen on a longer-term timeframe.

All of Bitcoin’s major bull markets have been fueled by a weakening DXY.

While all of Bitcoin’s major bear markets have coincided with a strengthening DXY.

It’s a slightly fuzzier picture for US stocks.

The short-term correlation is less evident here, and the lag time is more fluid.

But generally, a weaker DXY is usually good news for US stock indices, often on a short lag (between 0 and 3 months).

If this correlation holds, it’s currently signalling higher for US stock indices in the short-term.

And zooming out to a longer-term timeframe, we see US equity bull markets often coincide with a weakening DXY.

Whereas US equity bear markets - and extended flat, choppy periods - often coincide with a strengthening DXY.

Gold, on the other hand, has generally moved alongside the DXY in recent years.

Gold often strengthens immediately as the DXY weakens.

And often weakens immediately as the DXY strengthens.

In other words, gold generally “moves first”.

Gold has likely already priced in the recent big DXY down move.

But why does this dollar/asset price relationship exist?

The dollar weakening against other currencies is generally thought of as a liquidity-positive development on a global scale.

This is because the dollar plays a huge role in the global financial system:

• More than 60% of global debt is denominated in dollars

• More than 50% of global trade is denominated in dollars

So, if the dollar is weakening, this means servicing debt and conducting trade globally requires less liquidity.

This leaves more cash available to be put to work in financial markets, and lowers the risk of global credit events.

It also brings benefits inside the US as well.

Many of the largest US companies, including all of the largest US tech companies, are actually global companies and have significant international exposure.

More than 40% of total S&P 500 revenues come from abroad.

So when the dollar weakens, foreign earnings become more valuable in dollar terms, and US goods and services become cheaper for foreign buyers.

This can lead to improved earnings and profit margins, which tends to support stock prices.

A weakening dollar can generally be thought of as a loosening of “financial conditions”.

Of course, the opposite is also true - a strengthening dollar generally tightens “financial conditions”.

Is the US engineering a weaker dollar on purpose?

Some people believe the US is purposely working to weaken the dollar.

And the dollar might be set for further significant downside.

This would theoretically help to support manufacturing in the US - a key pillar of the Trump administration.

A weaker dollar would make producing goods in the US more attractive.

It’s thought by some that coordinated global currency “repricing” might be part of the ongoing worldwide tariff/trade negotiations.

This has been officially denied by US officials.

But there have been some, let’s say “funky”, moves in some Asian currencies recently.

And Japanese Finance Minister Katsunobu Kato has confirmed he has “bilateral currency talks” scheduled with US Treasury Secretary Scott Bessent at the upcoming G7 summit in June.

So, who’s telling the truth?

I’ll delve further into this topic in a future newsletter.

But for now, keep your eyes on the dollar.

It might just be the most important thing to watch (hence why it’s in our indicator chart at the top of every newsletter 😉 ).

That’s it for this edition - catch you for the next one.

🗨️ Alright, your turn—Bitcoin, stocks, or gold:

If you had to invest in only one for the next 12 months, what’s your pick and why?

Hit reply and drop your move. No wrong answers (just bragging rights later).

BITE-SIZED COOKIES FOR THE ROAD 🍪

US court rules Trump's global tariffs illegal. The Court of International Trade found he exceeded his authority under emergency powers, invalidating the 'Liberation Day' tariffs.

Nvidia CEO warns U.S. chip export curbs could backfire. Jensen Huang says restrictions on AI chip sales to China may boost Chinese rivals and weaken U.S. tech leadership.

Fed minutes show officials uncertain about economy's future. They highlight risks of persistent inflation and rising unemployment, prompting a cautious stance on interest rates.

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