Usman Salis
We might be watching a turning point unfold in real time. Apollo's analysts are sounding the alarm - history shows that when the dollar tanks like this, inflation follows. The timing couldn't be worse, with the Fed already walking a tightrope between growth and price stability.
What the Charts Reveal
The Kobeissi Letter recently flagged that the dollar is tracking toward its steepest annual collapse in over half a century. The comparison between the Consumer Price Index and the inverted Dollar Index tells a clear story. Apollo's projections show a potential 10% dollar drop by year-end, which could tack on roughly 30 basis points to inflation. We've seen this pattern before during the 2008 crisis and the 2021-2022 inflation spike - when the dollar weakens, consumer prices climb.
Why the Dollar Is Tanking
Three major forces are hammering the greenback right now:
- Rate Cut Expectations: Markets are betting the Fed will pivot to cuts, making dollars less attractive to hold
- Fiscal Mess: Soaring debt levels and potential government shutdowns are spooking investors
- Global Shift: Emerging markets are getting stronger while countries actively diversify away from dollar reserves
Here's where it gets messy. A weak dollar means everything America imports costs more - from electronics to food to energy. Commodities priced in dollars, like oil and gold, typically surge when the currency drops. This puts the Fed in an impossible spot. Cut rates to support growth and risk fueling inflation, or hold tight and watch the economy slow further.
Usman Salis
