Oil is the True Boss of the market
To illustrate today's analysis, I propose a model of statistical discrepancy on currencies, in order to justify who is the real leader of the financial markets, which seem to accuse a global pre-slowdown of the financial markets. So I gathered a basket of generally aggressive currencies to which I oppose them to a basket of defensive currencies; After algebraic manipulation, we find curiously (EXY + CXY + BXY)-(SXY + JXY). Initially, in both sides of the equations we found the U.S. dollars, Australian dollars, and New Zealand dollars since I assumed that these three currencies had the ability to play the role of risky assets and also assets Secure.
However, after algebraic manipulation, it is noted that the currencies symbolized by this equation (EXY + CXY + BXY) are other than the reflection of oil in terms of currency, either (Brent + crude oil or WTI). Also, we are aware that oil is intimately linked to Treasury bills and bonds, and their link is called inflation, where oil is the vector-director. What would, therefore, mean, in a hypothetical-deductible way, that statistically, empirically, and historically, the debacle of financial markets begin very often by a sharp fall in oil, which will then be transposed into the bond market, And finally going to happen on all the financial markets. That says currencies, says inflation, and therefore say obligation or bonds.
Looking at this graph, we are therefore on phases of uncertainty in the market to the point where pairs like the NZD are sought and also the oil is under pressure despite a weakening dollars. Both being inversely connected to the base. As long as we find ourselves below the levels marked yellow on the graph (143 and 136), this will mean that we won't be immune to another unscrewing, and oil, and markets indices and bonds. And so some major currency pairs defensive can enjoy like the Swiss franc or the Yen.
Finally, I should like to mention that, although oil is the market leader, it is not still the only one because the rates of bond yields also conditioning the financial markets. But what remains interesting in the context of this study and macroeconomic observation is that the rates of bond yields, and oil, and also the progression or growth of the indices, in particular, all militate for a common factor that Is inflation. And if Oil does not progress, then inflation will not follow, the major indices will not progress, and the bonds will not be contracted in order to stimulate the economy through spending, consumption and borrowing; There will, therefore, be a major general downturn in all financial markets in view of such a pace.
However, after algebraic manipulation, it is noted that the currencies symbolized by this equation (EXY + CXY + BXY) are other than the reflection of oil in terms of currency, either (Brent + crude oil or WTI). Also, we are aware that oil is intimately linked to Treasury bills and bonds, and their link is called inflation, where oil is the vector-director. What would, therefore, mean, in a hypothetical-deductible way, that statistically, empirically, and historically, the debacle of financial markets begin very often by a sharp fall in oil, which will then be transposed into the bond market, And finally going to happen on all the financial markets. That says currencies, says inflation, and therefore say obligation or bonds.
Looking at this graph, we are therefore on phases of uncertainty in the market to the point where pairs like the NZD are sought and also the oil is under pressure despite a weakening dollars. Both being inversely connected to the base. As long as we find ourselves below the levels marked yellow on the graph (143 and 136), this will mean that we won't be immune to another unscrewing, and oil, and markets indices and bonds. And so some major currency pairs defensive can enjoy like the Swiss franc or the Yen.
Finally, I should like to mention that, although oil is the market leader, it is not still the only one because the rates of bond yields also conditioning the financial markets. But what remains interesting in the context of this study and macroeconomic observation is that the rates of bond yields, and oil, and also the progression or growth of the indices, in particular, all militate for a common factor that Is inflation. And if Oil does not progress, then inflation will not follow, the major indices will not progress, and the bonds will not be contracted in order to stimulate the economy through spending, consumption and borrowing; There will, therefore, be a major general downturn in all financial markets in view of such a pace.
Francois Abley
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