crashbandicoot3| Fundamentals of Dollar Cyclical Volatility and the Impact of Monetary Policy: The Relationship between the U.S. Economy and Global Asset Prices

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[Hongta futures reveal the impact of the strong and weak cycle of the US dollar on commodity prices]

There are many factors in the fluctuation of the dollar.Crashbandicoot3At present, the mechanism behind the periodic change has not been fully understood. However, it is important for investors to understand the changes in the dollar cycle.

The appreciation of the dollar usually marks its strength, which is often accompanied by positive signs of fundamentals or monetary factors. For example, increased endogenous momentum in the US economy and improved economic fundamentals, such as higher growth, higher inflation, lower unemployment, and a narrowing of the international trade deficit, could contribute to the appreciation of the dollar. At the same time, when the Federal Reserve adopts the policy of raising interest rates, it will further enhance the value of the dollar.

However, after a strong cycle, problems such as trade deficit and industrial outflow will gradually emerge, and the endogenous growth momentum of the United States will begin to weaken. At this point, the Fed will adopt loose monetary policies, such as interest rate cuts or quantitative easing, to stimulate economic recovery. The depreciation of the dollar helps to enhance the export competitiveness of American goods, promote the return of manufacturing, and narrow the trade deficit. At the same time, the relative decline in asset prices has attracted foreign investment in US assets, further promoting economic recovery.

The relationship between the dollar and commodities shows a "seesaw" effect. When the Fed increases the amount of money, the market liquidity increases and the dollar depreciates, global asset prices fall relatively and investment and consumer demand increases, which in turn drives the expansion of commodity demand. As a result, against the backdrop of the dollar cycle, global credit expansion and demand expansion have contributed to a strong cycle in commodity prices.