Thesis: Increased Central Banks' balance sheets leads to currency debasement. Following from previous study into the increase in the Central Banks' Balance sheet.
Chart: DOLLAR INDEX WITH MAJOR CURRENCIES OVERLAID. To track %-changes of each currency relative to the US-Dollar 1/ from 1976 (removal of last tethers of gold standard) and 2/ from 2016. 'Strange' divergencies in currency valuations around that time. (Different timescales lead to different %-changes - provides further insights)
All currencies above DXY: cheaper than USD. Everything below, more expensive.
Conclusions:
The @federalreserve may be printing US$ are the rate of knots, but EUR, JPY CHF and GBP do the same, to varying degrees.
The currency debasement is relative. As currencies are measured against another currency, if the Principal is not depreciating as much as the counter party, the debasement is not as serious. I don't know if I can draw the conclusion that this is only true in international trade. Domestically, the counterparty depreciation doesn't matter, if the principal depreciates, there's inflation domestically.
GBP has expanded balance sheet the most, followed by EUR.
CHF appreciated most
JPY has expanded the least, hence the depreciation of JPY since 2021. Sudden reversal since 2023 - trouble in JPY bond market, as depreciation of currency leads to smaller bond returns.
THE FEDERAL RESERVE HAS A REPUTATION ON SOCIAL MEDIA FOR PRINTING MONEY, BUT IT APPEARS THEIR POLICY IS VERY MUCH MIDDLE OF ROAD.
How to trade this I am guessing that Bank of Japan will want the JPY to return to normal levels, to fix bond market.
Keep up the good work! Sharing is caring, so here is our technical analysis:
UnknownUnicorn39208297
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@TradingShot, Thanks. I am starting with the long term analysis, and then move down to the short term, and the trade setups. I will be sharing those too.
JoeChampion
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Great view mate!
UnknownUnicorn39208297
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@JoeChampion, Thanks. I am glad you find it useful. I will be sharing more.