Here’s the last and final pillar of macro and this guide.
Hope you’ve enjoyed it so far.
https://embed.notionlytics.com/wt/ZXlKd1lXZGxTV1FpT2lJNFpEa3hOekZpWkdVd04yRTBZVEUyT0dRek56RmpOMkZtTXpWaFlXTTROU0lzSW5kdmNtdHpjR0ZqWlZSeVlXTnJaWEpKWkNJNklqTmFhMGg1U1RWeU5FZFlWR1YwYUZsemNYcFhJbjA9
One last dance, let’s go!
Firstly, let's define what exchange rate policy is in laymen's English.
Exchange rate policy is the process a government or central bank takes to influence the value of its currency in relation to international currencies. There are several ways a government can do this, including setting a fixed exchange rate or allowing the market to determine the exchange rate or using a combination.
Each approach has pros and cons, and the best exchange rate policy for a country depends solely on its economic and political circumstances. Some governments might choose to fix their exchange rate in order to stabilize their currency and provide certainty to businesses and consumers. Other governments might allow their currency to float freely in the market, which can help to promote trade and investment but can also make the currency more volatile.
Exchange rate policy can have a significant impact on a country's economy and can affect everything from trade and investment to inflation and employment.
Do you really need to know all of this?
Being an FX or commodity or equity trader, this isn’t a do or die to know — BUT, if your aim is to build and branch off to create something larger say a boutique hedge fund, or macro fund which you’ll manage, the more you know about the markets you trade the bigger your advantage. Remember that.
Bobby Axelrod from Billions, a personal favourite
I’ve had the pleasure of speaking with professionals in the game such as the Head of Fixed Income from a large research house covering EM/FM markets, a Senior economist covering EM/FM and even the Head of Trading at a L/S equity hedge fund managing £1bn +
The one common trait I gathered in conversation, they know everything about the markets they trade. Everything.
You don’t get to that level by knowing 50%, 60%, or even 90% - they’re all in. The journey I’m still on, and one you should think twice about.