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🏦 MONETARY POLICY DIVERGENCE — WHY CURRENCIES TREND FOR MONTHS
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💡 THE CORE IDEA
Currencies pattern when central banks cease transferring collectively.
When one tightens whereas one other eases, capital flows don’t hesitate — they comply with yield.
This hole is known as financial coverage divergence, and it’s one of many strongest drivers of sustained FX developments.
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📊 WHAT IS MONETARY POLICY DIVERGENCE?
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It happens when central banks take totally different paths on:
Outcome:
Increased-yielding foreign money strengthens.
Decrease-yielding foreign money weakens.
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⚠️ WHY DIVERGENCE MOVES FX POWERFULLY
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1️⃣ Yield Benefit
Capital flows towards larger returns → foreign money demand rises.
2️⃣ Expectation Lock-In
As soon as divergence is predicted, markets worth it for months — not days.
3️⃣ Carry Commerce Enlargement
Merchants borrow low-yield currencies and purchase high-yield ones → pattern acceleration.
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📉 REAL-WORLD EXAMPLES
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🇺🇸 Fed vs BoJ
🇺🇸 Fed vs ECB (2022)
🇬🇧 BoE vs ECB
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⚙️ PRO TIP — WATCH EXPECTATIONS, NOT DECISIONS
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FX strikes when markets count on divergence — not when charges change.
Monitor:
When expectations align, developments prolong.
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🚀 TAKEAWAY
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Financial coverage divergence creates clear, sturdy FX developments.
So long as central banks transfer in reverse instructions, currencies received’t vary — they pattern.
In foreign exchange, alignment creates noise.
Divergence creates alternative.
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📢 JOIN MY MQL5 CHANNEL FOR MORE FOREX FUNDAMENTALS AND REAL-WORLD TRADING INSIGHTS:
👉 https://www.mql5.com/en/channels/issam_kassas
