Forex Live Interest Rates
Changes in the interest rates of your currency pair are the most important influences on the related currency values. A shift in the interest rate of a country is indicative of a government or central bank’s response to economic indicators in that country. It is a mechanism to stabilise the economic health of a country.
These changes are able to immediately impact on the market as one currency has now changed dramatically. Surprise rate changes can be more devastating as it causes volatility in the market which makes for faster movements in currency values.
The impact on currency values by interest rates is dependent on the amounts that are invested. The higher the rate of return, the higher the amount of interest that is earned will be, and the higher the profit margin of the investment. Following a strategy where you borrow currencies that currently have a lower interest rate to enable you to buy currencies with a high interest rate is a good idea. The one problem with this strategy is the risk that any fluctuation in that currency will offset any interest that may be earned.
The central bank in each country controls that country’s monetary policy. It sets the rate of interest that banks will pay to borrow funds from each other. In a thriving economy, the interest rates may be increased to curb inflation. When the economy is in a slump, interest rates will be lowered to promote lending as this will inject additional funds into the economy.
It is possible for forex live traders to pick up on clues related to the response and action of federal banks by being vigilant about economic indicators that affect a country’s economy and currency value. Some of the indicators to watch are:
- Employment levels
- Retail sales
- Consumer Price Index
- Gross domestic product
Predicting Forex Live Rates
It is possible to calculate an estimated rate change based on the economic factors and current state of the economy. If the indicators have improved over the assessed period and the economy is on the up, interest rates will have to be increased. In the event the improvement is limited and not very large, a decrease in the interest rate is likely.
Other than being aware of the usual economic data indicators, you should be aware of other factors that could affect the rate.
One of these is a major public announcement by the central bank. During these announcements, it is normal for the bank to indicate its views on inflation. These views could provide you with an indication as to whether the interest rates will rise or fall.
You can make use of professional predictions to predict potential interest rate fluctuations. Interest rate changes are normally well anticipated and professional traders, financial institutions and large brokerages often release their views on the potential rate change. It is suggested that traders take about five or six of these views and average them in order to obtain a more reasonable prediction.
When there is a surprise interest rate increase or decrease, you must act quickly. Forex trading moves fast when a surprise change is thrown into the market. You must however remain aware of a sudden trend reversal in these instances.