By Matthew Kerkhoff
If there’s one item that should be on every investor’s watch list, it’s the U.S. dollar. The greenback has always played a dominant role in global trade and capital flows, but the tenuous state of the global economy has markets placing an even greater emphasis on the dollar’s value.
It is often said that currency depreciation is the last means by which governments can drive growth. Gross Domestic Product can be calculated as the sum of household consumption (C), business investment (I), government spending (G) and net exports (exports - imports).
The first three items are domestic in nature, while the last is the result of global trade. When household consumption and business investment are lackluster, as they are in many parts of the world, and government spending is constrained by excess debt (also the case in many areas), the remaining lever often comes down to net exports, which is heavily ... Log in or subscribe to continue reading.