Macro themes: how do you turn a big story into specific trades?
"The dollar should weaken on rate cuts" is a story, not a trade. The trade needs an instrument, a trigger, a stop and a size — and the discipline to stay out until all four exist.
How do you convert themes?
- how you pick the instrument for a macro view
- the trigger that says the story is active now
- the theme you held too long
The bond yields guide and inflation targets guide supply the macro building blocks.
Background: Inflation targets of the major central banks: Fed, ECB, BoE, BoJ, SNB, BoC, RBA and RBNZ
Most major central banks aim for inflation of about 2%, but the measures and ranges differ. A reference guide to each target, how recent inflation compares, and why the details matter for currencies.
What is the Federal Reserve's inflation target?
2% over the longer run, measured by the annual change in the personal consumption expenditures (PCE) price index.
Which central banks have an inflation target range?
The Bank of Canada targets 2% as the midpoint of 1–3%, the Reserve Bank of Australia targets 2–3%, and the Reserve Bank of New Zealand targets 1–3% with a focus on the 2% midpoint.
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