Make the world go round!
In other words, dominated by global interest rates.
Interest rates are probably the biggest determinant of the perceived value of money.
It is therefore important to understand how countries make, for example, interest rate decisions.
One of the biggest influences on central banks’ interest-rate decisions is whether the price of money is stable, otherwise known as “inflation.”
Inflation is a steady increase in the prices of goods and services.
It is generally accepted that economic growth has brought about mild inflation.
However, excessive inflation can hurt the economy, which is why central banks always focus on economic indicators related to inflation, such as the consumer Price index () and personal consumption (PCE).
To keep inflation at a comfortable level, central banks are keen to raise interest rates most of the time, which leads to lower overall growth and inflation.
That’s because setting high interest rates typically hampers economic activity by forcing consumers and businesses to borrow less and tighten production.
Conversely, when interest rates fall, consumption will reduce borrowers, and firms are more inclined to borrow (as banks relax their lending requirements), increase retail sales and capital spending, and expand production to help the economy grow.
What does all this have to do with the foreign exchange market, you might ask?
Currencies depend on interest rates, which determine a country’s global capital inflows and outflows.
Investors use the data to determine reasons for whether to invest in the country or elsewhere.
For example, if you chose a savings account with an interest rate of 1% and another with an interest rate of 0.25%, which would you choose?
You may say that I vote for no one and tend to go the same route, but this is not a wise choice.
If you had to choose, you’d choose 1%, right?
Because 1 is greater than 0.25.
Interest rate decisions determine the trend of interest rates in the coming period.
Central banks make monetary policy and interest rate decisions based on a variety of factors, including economic growth, domestic inflation and unemployment.
Take the Federal Reserve Board (FOMC meeting: interest rate setting meeting) : If the Federal Reserve Board decides to lower interest rates at the interest rate meeting, cash deposits will earn less in the future.
People will withdraw money from banks for consumption or other investments, which will cause money to flow from banks to the market, thereby encouraging investment and consumption and promoting economic recovery and development.
Especially since the 2020 pandemic, most countries are currently keeping interest rates at low levels to mitigate the impact of the pandemic and boost economic development.
Generally speaking, it also acts as a “quasi-cut” if interest rates remain unchanged.
If they decide to raise interest rates: people will leave some of their money in the bank.
On the other hand, the company’s borrowing costs will increase accordingly, so there will be a corresponding decrease in working capital in the market.
Therefore, it can restrain consumption and restrain inflation.
Markets change in anticipation of different events and situations.
Interest rates change all the time, but not very often.
Most do not focus their time on the current rate because the market has already priced it.
They care about when interest rates start to change and what interest rates are expected to be.
It is also important to know whether interest rates tend to move in line with the trend of monetary policy and, more specifically, follow the operating cycle of monetary policy.
If interest rates have been falling for some time, the country will in due course introduce monetary policy to make them rise.
At some point, tax rates will start to rise.
So you can see that some speculators have been trying to figure out when it’s going to happen and how much it’s going to go up or down.
Hawkish Fed and Omicron jockeyed for market position as U.S. crude oil opened down nearly 3 percent to hit a new two-week low.
Please pay attention to the specific operation, the market is changing rapidly, investment needs to be cautious, the operation strategy is for reference only.
