Alpha Report: FX
Is the dollar rally putting pressure on everything?
The macro regime and its implications for assets over the next 30 days have been laid out in the following reports/podcasts:
Over the past 3 months, the DXY index has risen considerably due to the monetary policy differentials between the US and primarily the Eurozone.
The FX primers have laid out WHY there isn’t always an inverse correlation between the DXY and equities:
When we look back across the last 5+ years, the correlation between the DXY and S&P500 has been BOTH positive and negative.
One of the reasons the dollar has rallied as equities remain positive is due to the surprise in growth we have seen in the US:
This is in contrast to the economic surprise index in the Eurozone.
This is WHY we have seen EURUSD implied volatility (white) remain elevated as bond volatility (blue) and equity volatility (orange) have dropped:
These relationships and correlations will be important to watch as we move through the catalysts noted in the alpha reports.
Pulling things together:
Big picture, we remain in a regime where growth remains squarely positive in the US. This is reflected in the low number of delinquents and low level of credit spreads. As we move into December, watching how these monetary policy differentials get priced in connection with the gap in implied volatility will be critical. This will likely impact equities, metals, and Bitcoin.
More on this will be covered tomorrow
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After reading this as a first time paid member, I still don’t see where you’ve laid out ideas about direction of price expectations for equities and Bitcoin?