Video: Following the Capital Flows in FX, ETFs and Broader Markets
• A rise or fall in exchange rates inherently shows a shift in capital between economies
• Capital flow is the ultimate measure of market development - whether bullish or bearish
• There are other measures of investor appetite we can look at beyond FX such as ETFs
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With robust and active QE programs from the ECB and BoJ, will European and Japanese equities continue to outperform their US counterparts. Questions like this have many institutional and individual international investors shifting their exposure around the globe for the best relative returns. This comparative evaluation is familiar to FX traders - where divergences are the bread and butter of fundamental analysis - but it is increasingly a critical measure for all assets and all regions. Exchange rates give a good assessment of where the capital is flowing, but there are other measures that can supplement the view that FX gives us. ETFs have recently grown in profile as a regional investment opportunity, and the speculative barometer it offers is valuable. It can also give an assessment of demand outside of regional investment; it can also gauge appetite for asset type, highlight internal discord and even speak to universal sentiment itself. We take a look at underlying capital flows - the backbone of market movement - in today's Strategy Video.
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