Increasing Your Knowledge
If there’s one factor to count on when trading the Forex is that interest rates affect the currency markets. The costs of borrowing money give investors the reason to move money from one country to another in hopes of earning high yields. For years, professional investors have kept an eye on interest rate spreads. But for a trader, what are important are the predictions of where interest rates will be in the future.
Experts like Kathy Lien, who has written an impressive number of books relating to the Forex capital market, who heads the department of currency research for one of the biggest Forex firms is of the believe that by knowing what “makes the central banks tick” you’ll be in a position to better forecast currency moves.
Hence, she suggests having some information regarding central banks. Note that probably the most influential of all is the Federal Reserve in the U.S. With the greenback accounting for 90 percent of FX currency trading, this institution has an impact on many monetary units. The group of people who makes the decisions is known as the FOMC and they’re perhaps the dollar’s movers and shakers.
We also have the European Central Bank which was founded in 1999. Its 6 member governing council is in charge of determining monetary policy. And of course there’s the Bank of England, Bank of Japan, Bank of Canada etc. all very influential. Some of them meet monthly, others with more frequency throughout the year.