Christopher Christopher White#58

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What are global liquidity cycles and why are they crucial for forex?

Global liquidity cycles refer to the ebb and flow of capital driven by central banks, credit markets, and risk sentiment. In times of abundant liquidity (QE, low rates), high-yield and EM currencies rally as investors seek returns. When liquidity tightens (QT, rising yields), flows reverse to USD and safe havens. Institutions map liquidity cycles using central bank balance sheets, repo rates, and cross-border flows. Retail traders can infer liquidity conditions from trends in equities, credit spreads, and commodity prices. Benefits: liquidity cycles explain multi-year forex trends beyond daily noise. Risks: policy shifts or crises can abruptly change direction. Recognizing liquidity cycles allows traders to align with structural trends rather than fight them.