Global FX: How much is too much?

The podcast explores the dynamics of FX in light of recent equity market volatility, focusing on whether the traditional inverse correlation between stocks and the dollar still holds. The discussion highlights that while structural reasons for a bearish dollar persist, a slight return to "risk on, risk off" behavior was observed. The panel also analyzes the surprising lack of dollar response to strong payroll data, attributing it to the Fed's asymmetric reaction function. Examining the yen's movements post-election, the podcast suggests markets may have prematurely priced in yen strength, pending further clarity on the government's fiscal strategy. Additionally, the panel discusses the divergence in European FX, particularly the Euro-NOKI pair breaking a multi-year range due to a combination of flow dynamics and CPI data. Finally, the podcast touches on potential shifts in US FX policy and the ongoing USMCA renegotiations, both of which could impact currency valuations.