Category: 2. Intermarket Correlations

How Fixed Income Securities Affect Currency Movements

A quick recap: So far, we’ve discussed how differences in rates of return can serve as an indicator of currency price movement. As the bond spread or interest rate differential between two economies increases, the currency with the higher bond yield or interest rate generally appreciates against the other.Fixed...
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How Bond Spreads Between Two Countries Affect Their Exchange Rate

The bond spread represents the difference between two countries’ bond yields. These differences give rise to carry trade, which we discussed in a previous lesson. By monitoring bond spreads and expectations for interest rate changes, you will have an idea where currency pairs are headed.Here’s what we mean: As the bond spread between...
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How Bond Yields Affect Currency Movements

A bond is an “IOU” issued by an entity when it needs to borrow money. These entities, such as governments, municipalities, or multinational companies, need a lot of funds in order to operate so they often need to borrow from banks or individuals like you.When you own a government bond, in...
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The U.S. Dollar And Oil Relationship Is Changing

Historically, the price of oil is inversely related to the price of the U.S. dollar. The explanation for this relationship is based on two well-known premises. A barrel of oil is priced in U.S. dollars across the world. When the U.S. dollar is strong, you need fewer U.S. dollars to...
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How Oil Moves with USD/CAD

Let’s talk about the other kind of gold… the black one. As you may know, crude oil is often referred to as the “black gold” or as we here at BabyPips.com like to call it, “black crack.” One can live without gold, but if you’re a crack addict, you...
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How Gold Affects AUD/USD and USD/CHF

Before we detail the relationship between the com-dolls and gold, let’s first note that the U.S. dollar and gold don’t quite mesh very well. Usually, when the dollar moves up, the gold falls and vice-versa. The traditional logic here is that during times of economic unrest, investors tend to...
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