Why are forex traders interest rates so important?

TTSMarkets

Banned
Jul 9, 2020
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India
When it comes to forex markets, there’s one factor that trumps anything else. Many people may think economic indicators can greatly move markets. Of course, you’ll often see stories about wages, prices, etc. making a big impact.

Interest rates, however, play a major role in these market movements. Looking at it, a job report may have a big impact on FX currency pairs. But it has such an impact because of how the report can influence interest rates.

Central bankers meet almost once a month (depends on schedule from one central bank to another). The central bank’s monetary policymaking staff assesses the economy at such meetings.

Assessment requires wages, labor market, GDP growth, etc. As you can see, these economic indicators tend to influence decision-making.

Thus, while economic indicators might seem to have a big impact in one way, the reason behind this impact is how they can shift interest rate expectations.
 
Jul 23, 2020
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Many things affect the movement of FX currency prices. Interest rate is one of them. The FX market depend on currency and currency depend on interest rate. Interest rates determine the global capital for a country. The higher the interest rate of a country, the more likely that the currency of that country will be stronger. Alternatively, currencies plagued by low interest rates are likely to weaken in the long run.
 

martin29

Trader
Jul 23, 2020
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A currency pair is a price quote of the exchange rate for two different currencies traded in FX markets. When an order is placed for a currency pair, the first listed currency or base currency is bought while the second listed currency in a currency pair or quote currency is sold
 

Zeenat shein

Trader
Apr 11, 2020
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Interest rates are crucial to day traders in the forex market because the higher the rate of return, the more interest is accrued on currency invested, and the higher the profit. Of course, the risk in this strategy is currency fluctuation, which can dramatically offset any interest-bearing rewards.