Supposedly the correlation was that when the dollar was weak, the SP was strong. We were warned that when the dollar would rally, the SP would crack. However, the unemployment numbers showed that the US Economy could be turning--thus making our dollar attractive again, especially since it was beat down so far.
So now being short the DXY and long the SP is now a no longer correlated pairs trade.
The economy's perceived strength is an offset.
The idea that risk assets were only going up because of dollar weakness wasn't true.
It just looks that way. Obviously, the economy is getting better, and risk assets were just priced too cheap.
3 comments:
Palmoni, could you help explain the DXY vs SP...so dollar falls and SP is up but now they are both up?
Supposedly the correlation was that when the dollar was weak, the SP was strong. We were warned that when the dollar would rally, the SP would crack. However, the unemployment numbers showed that the US Economy could be turning--thus making our dollar attractive again, especially since it was beat down so far.
So now being short the DXY and long the SP is now a no longer correlated pairs trade.
The economy's perceived strength is an offset.
The idea that risk assets were only going up because of dollar weakness wasn't true.
It just looks that way. Obviously, the economy is getting better, and risk assets were just priced too cheap.
Isn't there a risk of getting zapped by X-rays??
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