We all know that the forex and stock markets are related, so it’s of course a good idea for forex traders to keep an eye on what equities are doing. This relationship is made more apparent by a few circumstances. We can get some insight from the stock market, especially in the United States, into what to expect from the currency markets.
What’s going on?
We must remember that bonds are a key link between the currency and stock markets. For example, investors will buy bonds if they see their bond prices falling. This increases the currency’s value relative to other currencies. Investors leave the stock market to invest in bonds. The stock market falls as a result.
This is why there is an inverted relationship between currency and stock market. Now, that doesn’t always line up exactly, because it depends on why the price of bonds have gone down. Another important factor is risk perception. Stocks carry a greater risk than bonds, so investors will seek out bonds and exit the stock market when it is risky.
What’s driving the underlying market
The problem is that the…