Brent Donnelly Shares Key Insights on FX Market Dynamics
A focus on FX is anticipated for 2025 due to its role in reflecting interest rate differentials and tariffs, influencing global capital flows.
Key insights from an interview with macro FX trader Brent Donnelly include:
- Capital flows act as accelerants, not primary drivers. Major factors like rate differentials take precedence.
- Emerging market currencies are largely influenced by carry trades. For instance, selling USD for Brazilian currency can yield significant returns through carry.
- The recent Bank of Japan rate hikes (15 and 20 basis points) are expected to lead to cautious signals from the central bank, potentially resulting in a dovish outcome despite market expectations of further hikes.
The discussion also touches on the effects of Trump's tariff policies on FX currencies.