Paul Donald R Smith#19

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How does monetary-fiscal policy coordination impact forex?

When monetary and fiscal policies align, currency outcomes are amplified. For example, tight fiscal spending combined with hawkish monetary policy strengthens currencies. Conversely, loose fiscal and dovish monetary weaken them. Institutions analyze government budgets alongside central bank policies to anticipate trends. Retail traders can use policy coordination as a macro signal. Benefits: stronger directional clarity when policies reinforce each other. Risks: policy conflicts create uncertainty and volatility. Coordination—or lack thereof—shows that forex reflects the broader economic policy mix, not isolated actions.