The post FX lessons from Brent Donnelly  appeared on BitcoinEthereumNews.com.

This is a segment from the Forward Guidance newsletter. To read full editions, subscribe. A major thesis I have for 2025 is that FX will be one of the key macro assets to focus on.  The big reason is that FX currencies are the exhaust valve for interest rate differentials between other countries, and therefore tariff implementation since that gets directly imputed into global capital flows that are key drivers of global currencies.  With this belief in FX volatility being the key exhaust valve of Trump’s tariff and trade policy this year, I went ahead and interviewed one of the best macro FX traders I know: Brent Donnelly of Spectra Markets. Of course, nothing beats watching the full episode, but here are a few of my favorite takeaways:  On how much capital flows drive FX currency:  “The hard thing is that the capital flow stuff kind of happens around the edges. So if you have a good capital flow story, that could be marginally biased in one direction. But if the bigger drivers like rate differentials are pointing in the other direction, it’s not going to work. So capital flows tend to be more of like an accelerant, not a directional driver.” On how emerging market currencies are mostly driven by carry trades: “For an EM it’s usually all about the carry. So if you can sell USD and buy Brazil and it goes nowhere for a year, let’s just say you make 10% on that carry. That’s a really good carry trade. So dollar Brazil is going to go up and down. But if you have the view that dollar Brazil is going to go down, it’s kind of a free lunch. So like for two years in Mexico, it was basically a free lunch to own Mexican pesos…

---

Filed under: News - @ January 23, 2025 9:13 pm