Capítulo 3 de 5

Fundamental Analysis

Fundamental analysis examines the macroeconomic forces that drive currency valuations: interest rates, inflation, growth differentials, current account balances, and political stability. Understanding these factors is essential for positioning ahead of major market moves.

2 lecciones

Exchange Rate Theories

Several theoretical frameworks attempt to explain long-run exchange rate equilibrium.

Purchasing Power Parity (PPP): Exchange rates should adjust so that identical goods cost the same in different countries after conversion. If a basket of goods costs $100 in the US and £80 in the UK, PPP implies EUR/GBP ≈ 100/80 = 1.25. In practice, PPP holds only over very long horizons.

Interest Rate Parity (IRP): The forward exchange rate should reflect the interest rate differential between two countries. Higher interest rates attract capital inflows, appreciating the domestic currency — but forward contracts adjust to eliminate risk-free arbitrage.

Balance of Payments (BoP): A persistent current account deficit requires financing through capital inflows. If inflows falter, the currency must depreciate to restore balance.

Monetary Theory: Excess money supply growth relative to economic output causes inflation and currency depreciation (quantity theory of money).

Puntos Clave

PPP: equalises goods prices across borders — valid over decades, not months
IRP: interest differentials determine forward rates; drives carry trade
BoP: trade/capital flows must balance; deficits require financing or depreciation
Monetary model: excess money supply → inflation → currency weakness

Theory	Core Mechanism	Time Horizon	Practical Use
Purchasing Power Parity	Price level equalisation	Long-run (5–20 yr)	Fair value benchmark
Interest Rate Parity	Rate differential → forward rate	Short-medium term	Carry trade analysis
Balance of Payments	Trade/capital flow balance	Medium term	EM currency risk
Monetary Model	Money supply vs. output	Medium-long term	Inflation forecasting

Caso de Estudio: The Carry Trade — JPY Funding

Bank of Japan · AUD/JPY spot

In 2006–2007, the Bank of Japan maintained its policy rate at near-zero (0.25%). A broker analyst at a global macro fund recommended borrowing in JPY and deploying capital into higher-yielding AUD assets (then paying 6.25%). The net carry — the interest rate differential — was approximately 6%. As long as AUD/JPY remained stable or appreciated, the strategy was profitable. When the global financial crisis hit in 2008, however, the carry trade unwound violently: AUD/JPY fell from 107 to 55 in six months as positions were liquidated.

Conclusión: Carry trades are profitable in stable markets but carry significant unwind risk during crises.

Preguntas de Repaso

QWhat is covered interest rate parity?

Covered IRP states that the forward exchange rate exactly offsets the interest rate differential between two currencies, eliminating arbitrage. For example, if USD rates are 2% higher than EUR rates, the EUR should trade at a 2% forward premium to USD.

Key Economic Indicators for Forex Traders

Macroeconomic data releases move exchange rates significantly. Traders monitor an economic calendar and position ahead of, or react to, key releases.

Interest Rate Decisions: The most powerful single event. Central bank rate changes directly affect yield differentials and capital flows.

Inflation (CPI/PCE): Signals future monetary policy direction. Above-target inflation → hawkish central bank → potential rate hike → currency appreciation.

Employment Data: US Non-Farm Payrolls (NFP) — released first Friday of each month — is the most watched single data point in global Forex.

GDP: Quarterly growth prints confirm or challenge the macro narrative.

Current Account / Trade Balance: Persistent deficits put long-term selling pressure on a currency.

PMI Surveys: Forward-looking business confidence indicators. A PMI above 50 signals expansion; below 50 signals contraction.

Puntos Clave

Central bank rate decisions are the single largest currency mover
US NFP (first Friday, monthly) triggers the highest intraday Forex volatility
CPI prints guide central bank hawkishness / dovishness expectations
PMI data is forward-looking and often trades ahead of hard GDP data

Indicator	Release Frequency	Typical Market Impact	Key Pair Affected
Fed Funds Rate	8× per year (FOMC)	Very High	All USD pairs
US Non-Farm Payrolls	Monthly (1st Friday)	Very High	EUR/USD, USD/JPY
CPI (US)	Monthly	High	All USD pairs
GDP (US/EU)	Quarterly	Medium-High	EUR/USD, GBP/USD
ISM / PMI	Monthly	Medium	USD, EUR pairs
Trade Balance	Monthly	Low-Medium	Domestic currency

Preguntas de Repaso

QWhat does a PMI reading above 50 indicate?

A PMI (Purchasing Managers' Index) above 50 indicates that the manufacturing or services sector is expanding. This is generally positive for the country's currency as it suggests economic growth.

QWhy does above-target inflation often lead to currency appreciation?

High inflation signals that the central bank may raise interest rates to cool the economy. Higher rates attract foreign capital seeking better returns, increasing demand for the currency and causing it to appreciate.

Cap. 2: Major Currencies and Trading Systems

Cap. 4: Technical Analysis

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