Jack A915 Jenkins#73

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How do inflationary cycles impact forex markets?

Inflationary cycles, marked by rising consumer prices, push central banks toward hawkish stances. Currencies of countries with aggressive tightening (e.g., USD in 2022) gain strength, while those lagging behind weaken. Institutions hedge inflation with commodities, bonds, and currency baskets. Retail traders can use inflation reports like CPI or PCE to anticipate policy shifts. Benefits: inflation cycles provide clear directional clues. Risks: stagflation complicates outlooks, as growth slows despite high inflation. Inflation cycles prove forex is driven by real-world purchasing power and policy credibility. Traders who ignore inflation miss a critical driver of long-term trends.