The Macro-to-FX Transmission Series
How Macro Moves Currency
Articles tracing the transmission path from macro conditions to currency direction — volatility regimes and rate structure through dollar bias and into individual pair positioning. The same chain the monitor follows, explained in full. Series in progress.
Why Bond Volatility Matters More Than Stock Volatility for Forex Traders
The bond option volatility index leads equity volatility during crises and drives carry trade unwinds that reshape FX markets. Learn why institutional traders watch bond volatility before equity volatility.
Read →The VIX-to-Currency Pipeline: How Equity Volatility Moves Forex Markets
Institutional evidence shows VIX drives FX through intermediary leverage, carry trade unwinds, and safe-haven flows. Learn the thresholds that trigger EM liquidation and JPY safe-haven buying.
Read →The 2-Year Yield Is the Most Important Number in Forex (And Most Traders Ignore It)
A 1 percentage point widening in the 2-year rate differential is associated with roughly 3.5% dollar appreciation. The Fed's own research uses the 2Y rate as its primary explanatory variable for FX.
Read →Reading the Yield Curve for Currency Direction: The Spreads That Actually Matter
The 3m2s spread signals FX moves 1-4 weeks ahead. The 2s10s signals structural shifts over quarters. Learn the yield curve spreads institutional desks use for currency positioning.
Read →Rate Differentials: The Structural Floor Under Every Currency Move
Central bank policy rate gaps set the base case for every FX pair. Fed research quantifies it: 3.5% USD appreciation per 1pp widening. Taylor rule fundamentals beat a random walk out of sample at short horizons.
Read →The Dollar Index Decoded: Why DXY Is 57.6% Euro (And What That Means for You)
The US Dollar Index has a 0.98 monthly correlation with EURUSD. European currencies make up 75% of the index. Learn what DXY actually measures, the Dollar Smile framework, and how each G10 pair responds differently to dollar moves.
Read →EURUSD and the Energy Vulnerability No One Talks About
The ECB put the energy contribution to the euro area's terms-of-trade impact at 3.5 percentage points of GDP, and recorded a 3.6 percentage point current account swing, the biggest on record. Here is the transmission channel that makes EURUSD uniquely sensitive to oil and gas prices.
Read →Safe-Haven Currencies: Why JPY and CHF Move When Everything Else Falls
Fed research finds only the JPY appreciates as market uncertainty rises, regardless of the prevailing level. Net foreign assets are one of several factors associated with safe-haven status. Learn when these flows override rate differentials.
Read →Carry Trades Explained: The Strategy That Makes Billions Until It Doesn't
A global FX volatility factor prices the cross-section of carry trade returns. Bond volatility is the early warning for carry collapse. Learn the institutional evidence behind the world's most popular and most dangerous currency strategy.
Read →Sector Rotation as a Currency Signal: What XLU, XLE, and XLF Tell You About the Dollar
A Charles H. Dow Award paper found utilities leading the broad market flags a higher-volatility regime. Sector rotation confirms or contradicts your macro FX read. Learn the institutional cross-asset framework that most currency traders have never seen.
Read →EM Currencies Under Stress: What Drives USDZAR, USDMXN, and the Emerging Market Carry Complex
EM currencies depreciate gradually on carry inflows and crash violently on risk-off outflows. The ECB decomposes EM FX into four factors. The BIS documents how a strong dollar tightens EM credit.
Read →Building a Macro-to-FX Framework: How Institutions Turn Data Into Currency Bets
Exchange rate models fit the dollar far better than they did in 1983, and Engel and Wu tie that to inflation targeting — but fitting is not forecasting. How institutions build systematic macro-to-FX frameworks using four transmission channels, conviction scoring, and regime gating.
Read →The Forward Premium Puzzle: Why High-Rate Currencies Go Up Instead of Down
Economic theory says high-interest-rate currencies should depreciate. They don't. This 40-year anomaly is the engine behind every carry trade and the reason your forex textbook is incomplete.
Read →Evidence Base & Citations
Two systematic evidence reviews backing the macro-to-FX transmission framework. Citations to BIS, NBER, Federal Reserve Board, IMF, and peer-reviewed sources.