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.
Ashraf Laidi and Adam Button met in London, discussing a few topics, ranging from gold to the British Pound's prospects, the Bank of Canada's next step and the euro's growing role as a funding currency. Full video.
GBP-USD Yield Spreads
As GBP becomes the 2nd highest performing currency in the G10 since the start of the year, posting daily gains not seen in 10 years, here is a look at the current yields situation, with GBP...