The weekly figures on traders' futures commitments obtained from the Chicago Mercantile Exchange's International Monetary Market shed valuable light on the developing flows pursuing one currency versus another.
Rather than simply comparing currencies' overnight interest rates, FX traders pay close attention to differentials in 10-year yields for the market's assessment of longer term interest/inflation rate horizons. The relationship is straight forward.
Interest rates are the single most important fundamental driver in Forex and the direction of monetary policy is essential in shaping developments in currencies. This direction is determined by the vast array of economic reports, central bank rhetoric and movements in equity and bond markets.
Weakness Trumps Fear: What Matters
One notable reason the VIX is trading at only half the level seen in August (53.0), a time when equity indices plunged near today's levels is related to market's absorption of risk versus macro...