Central Bank Decisions
Interest Rates Impact on Forex Pairs
Interest rates play a crucial role in forex pair prices by affecting the returns on investments in various currencies. Higher interest rates attract foreign capital, boosting the currency's value, while lower rates can lead to depreciation. Traders keep a close eye on central bank meetings for clues about potential rate changes, as these decisions directly impact currency valuations. Central banks consider key economic indicators such as inflation, the Consumer Price Index (CPI), labor market conditions, and earnings reports when setting interest rates. These factors provide insights into the economy's health and guide monetary policy. Additionally, major banks and institutions often hold positions overnight to profit from swap rates and interest rate differences, making interest rate trends particularly important. This is why traders diligently monitor central bank interest rate changes and their decisions.
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