The Impact Of Interest Rates On Trading In Forex Market Interest on the currency in circulation and determined by the Bank Center for the exporting country of the currency rate is very important for Omnia Investments APP traders in the forex market, the more the interest rate is high whenever he invested in the currency on profits.
Interest rates are considered one of the most important factors that influence the trends of foreign currency pairs in the forex market, and are changing the interest rates by the central banks of each country or group of countries (along the lines of the European Union), depending on the economic conditions and the objectives of monetary policy. The central banks in crisis and the recession cut interest rates to try to push the economic wheel, and the increase in cases of economic prosperity to curb inflation. The affected traded currency pairs in the forex market dramatically changes t occur to the interest rate, especially when the change is sudden and unexpected market. Understand the fluctuations resulting from changes in interest rates and with the proper interaction of traders can take advantage of this event and realize profits.
Interest on the currency in circulation and determined by the Bank Center for the exporting country of the currency rate is very important for Omnia Investments APP traders in the forex market, the more the interest rate is high whenever he invested in the currency on profits. But in this strategy lies in the risk of fluctuations that may know the currency pairs, which may make the profits earned by the rolling of interest is a percentage value. So Buying a currency with a high interest rate for the sale of a low interest rate currency (This strategy is known as Curry want) is not always a good thing, if it was that simple for everyone has to apply this strategy and most traders became rich.
The Board of Directors of each central bank to set interest rate that will be dealt with within the country, depending on the economic conditions of the country and the goals of monetary policy. The central bank to raise interest rates in periods of economic growth for the control of loans available to individuals and institutions to curb the size of the inflation rate, and reduction in cases of slow economic growth to encourage investment and inject liquidity into the economy.
forex trading related to interest rate in many ways
Can figure out the direction in which interest rates will go through the control of some important economic indicators as an indicator of consumer prices (CPI), the unemployment rate, consumer spending and the real estate market rate. By understanding and analyzing the data of these economic indicators, a trader can be expected that the central bank will do with respect to the interest rate. In general, if these positive Omnia APP indicators data in the continuous improvement is accompanied by the improvement in economic growth, the central bank may decide to raise interest rates or leave them unchanged in the case of this improvement was modest and not equivalent to the central bank’s objectives. On the contrary, if the economic indicators mentioned data in advance it is positive, with weak economic growth, the central bank may decide to cut interest rates to inject liquidity into the economy to increase borrowing and encourage investment.
Can also traders predict the central banks ‘decisions with respect to the interest rate by the statements of the Board of the central banks’ management, sometimes they do these members to make permits to the media about the outlook for economic indicators like growth rates, inflation and the unemployment rate, which may give clues on future decisions The central bank might take.
For example, on July 16, 2008, during a press meeting for Ben Bernanke governor of the Federal Reserve Bank (the central bank in the United States) on the monetary policy of the Bank, said Bernanke to the press that the US dollar in a good state and that the US government is seeking to make the dollar more stable in spite of that fears of an economic recession dominated the financial markets. However 10am solutions to the US dollar began to rise in the short term against other currencies, as traders considered that the central bank governor’s comments positive for the dollar and therefore a high probability hike. During the same day the EUR – The dollar fell (EUR / USD) American by 44 points in just one hour.
chart shows the influence of interest rate
Although many of the traders who collect and keep track of all the data on economic indicators to try to predict future decisions of central banks on interest rates, but these banks take a lot of times unexpected decisions that make the currency pairs are sharp and volatile movements in the forex market. In such cases, you must know the general direction that will move the market, if it was the decision is to raise the interest rate, the currency in question will rise its value against other currencies because traders will accept the purchase, while if the decision is to reduce the interest rate of the currency in question the resolution will decrease its value means that traders will try to get rid of them and buy a higher interest rate currencies and thus lower its value against other currencies. Once you know this you will need to act quickly, markets are moving fast and know sharp fluctuations when a news unexpected surprise the markets, which may make a lot of traders earn huge money in a short time, while losing traders who were against the trend a lot of money in a short time Also.