I talk as amateur, ex-fx trader. I think your prediction is right but for other reasons. I think that US dollar is the dominant currency when the fear is widespread. Post -GFC the mood was the money to be near FED, but Fed 's huge covid intervention has changed this . Market believes that the FED always will bail out the investors. No fear at all, even if FED has increased its rate so much. Normally $ should have inreased more, but it hasn't. The US fiscal extravaganza is additional factor that support this narrative.
I am not a FX specialist; but, as such, I am like the majority of private investors.
If £/ $ falls, my US shares rise when denominated in GBP£, and vice versa. Over time it averages out. You can buy $ Funds hedged back into GBP£ but this has an extra expense. Thus I ignore FX rates.
Amateur view from Europe here: I think that the influence of the fiscal deficit on currency should also depend on what the debt is used for. E.g. Richard Vague argues in his book "the paradox of debt" that debt has been an important driver for economic growth in the USA. And I think that a reason for this may be how the USA have been using debt: just to contrast USA and Europe: IMO the USA are using a large part of their debt for investments, while we in Europe are using debt mostly for consumption, saving EU states from bankruptcy, and increasing social transfers. I think that If you use debt to drive growth, then this growth will lead to increased GDP, increasing inflation, rising interest rates and this should drive the valuation of a currency upwards. The way we Europeans are using debt should drive currency valuation downwards (and if you look at the data: EUR/USD has been in a downwards trend since the financial crisis of 2008)
good theory/observation. It all comes down to: weak economies have weak currencies. Nobody got happy with Argentian pesos, or whatever the current name was. On the other hand, a Europe with sick man Germany doesn't per se have to be weak. Plenty of potential in the Nordics, Baltics, NL, F, ES and PT.
Makes a lot of sense to me. That said, I am only experienced in FX inasmuch as I've managed to be on the wrong side of currency markets more often than I'd like to say.
In particular, I'd like to learn more about the inverse relationship between the S&P500 and the USD. For quite a time now one went up when the other went down, and vice-versa. In which times does this happen, and can we expect it to continue?
Are there real forex specialists?
...just kidding
I talk as amateur, ex-fx trader. I think your prediction is right but for other reasons. I think that US dollar is the dominant currency when the fear is widespread. Post -GFC the mood was the money to be near FED, but Fed 's huge covid intervention has changed this . Market believes that the FED always will bail out the investors. No fear at all, even if FED has increased its rate so much. Normally $ should have inreased more, but it hasn't. The US fiscal extravaganza is additional factor that support this narrative.
I am not a FX specialist; but, as such, I am like the majority of private investors.
If £/ $ falls, my US shares rise when denominated in GBP£, and vice versa. Over time it averages out. You can buy $ Funds hedged back into GBP£ but this has an extra expense. Thus I ignore FX rates.
Amateur view from Europe here: I think that the influence of the fiscal deficit on currency should also depend on what the debt is used for. E.g. Richard Vague argues in his book "the paradox of debt" that debt has been an important driver for economic growth in the USA. And I think that a reason for this may be how the USA have been using debt: just to contrast USA and Europe: IMO the USA are using a large part of their debt for investments, while we in Europe are using debt mostly for consumption, saving EU states from bankruptcy, and increasing social transfers. I think that If you use debt to drive growth, then this growth will lead to increased GDP, increasing inflation, rising interest rates and this should drive the valuation of a currency upwards. The way we Europeans are using debt should drive currency valuation downwards (and if you look at the data: EUR/USD has been in a downwards trend since the financial crisis of 2008)
good theory/observation. It all comes down to: weak economies have weak currencies. Nobody got happy with Argentian pesos, or whatever the current name was. On the other hand, a Europe with sick man Germany doesn't per se have to be weak. Plenty of potential in the Nordics, Baltics, NL, F, ES and PT.
Makes a lot of sense to me. That said, I am only experienced in FX inasmuch as I've managed to be on the wrong side of currency markets more often than I'd like to say.
In particular, I'd like to learn more about the inverse relationship between the S&P500 and the USD. For quite a time now one went up when the other went down, and vice-versa. In which times does this happen, and can we expect it to continue?