Why FX Volatility Will Dominate Markets In 2025 | Brent Donnelly
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Scale is the blockchain that's truly built different. Explore more at scale.space/ecosystem, and follow them on x@scalenetwork. Alright. Welcome back to another episode of Ford Guidance, and joining me today is Brent Donnelly, presented at Spectrum Markets. Brent, I could not have asked for a better guest today. We are coming off the the back of the inauguration yesterday, and there's obviously been a lot of a buildup in anticipation over the last month and a half or so in terms of what's actually gonna happen when the rubber meets the road, how's that gonna impact currencies, how's that gonna
Yeah. Nice to be here. And it's funny, just a little anecdote. So my subscriptions because I write about global macro, and equities and everything, but my main focus is FX. And my subscriptions are correlated to how interesting FX is, and so I've been getting a lot of new subscribers lately because FX is, is great again. I
know. I've been thinking through the asset classes for 2025, and I feel like it's just gonna be the year for currency. So, yeah, it'll be great to to set the stage with you.
Yeah. Actually, one thing just on that note is that if you look at vol across asset classes, actually, FX vol has stayed kind of pretty close pinned to the highs, whereas, like, move index, and obviously, VIX are basically at the lows, but yet FX vol is near the highs. And, I mean, that's something we can talk about, but it's symptomatic of what's going on in FX that it's the release valve for tariffs.
Yeah. Yeah. 100%. So okay. So before we do the deep dive on the FX and and get everybody up to speed because it's a world that, you know, some people just don't even pay that much attention to. So we'll get everybody up to speed. But before we do that, I do wanna just get to what everybody's probably thinking about, which is, okay, we've had the inauguration yesterday. We've had the litany of executive orders come through, and there's been a distinct lack of actual tangible implementation of of tariffs. There was, just off the cuff, I believe, last night as he was signing executive orders at t
Sure. So it's so interesting because I would presume most of your viewers were around in 17, 18. And, you know, I'm a big pattern recognition guy, and there's so much that's just identical to 27 2017, 2018. In fact, Bloomberg once wrote a somewhat comical article about how Trump always says everything will be ready in 2 weeks. So they gave, like, 10 examples of him saying it's gonna be ready in 2 weeks. It never is. It's like Elon and self driving. You just kind of say whatever you wanna say, but it's actually not true. And so the thing with the tariffs is that it's a massive deal. Right? It's
I'm I'm glad you brought up both the dollar and the poly market odds because I've been trying to think through the the contrast between the two and what have we actually seen the market price in over those last month of run up in the anticipation of what we've seen. And to your point, poly market odds are on the floor, you know, 10, 20% odds or whatever of of substantial tariffs. But then when you compare the dollar run up from a 100 to, like, 109 or wherever it got to, and then you look at the 100, you know, basis points and increase in, like, the 10 year yield, there's been a lot of you know
Well yeah. But the it's a good question because you're basically asking, like, what are the principal components that are driving the dollar higher? And tariffs is 1 and yields are the other one. And then you start to decompose, okay, like, why are yields going up? And a lot of it, I don't think,
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