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The one factor that is sure to move the currency markets is interest rates. Interest rates give international investors a reason to shift money from one country to another in search of the highest and safest yields.
The growing interest rate spread between countries has been the main focus of professional investors, but what most individual traders do not know is that the absolute value of interest rates is not what’s important instead what really matters are the expectations of where interest rates are headed in the future.
Familiarizing yourself with what makes a central bank tick will give you a leg up when it comes to predicting their next moves, as well as the future direction of a given currency pair.
KEY TAKEAWAYS
Central banks are responsible for setting interest rates and controlling the money supply of a country.
As a result, central bank activity is a key factor closely watched in FX and other asset markets.
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We will look at several of the world’s most influential central banks and how their policies are interpreted by currencies traders.
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