hi there traders in this short video we will have a look at probably the most important economic factor which are interest rates for traders and investors interest rates of certain country is an Alpha and Omega of evaluating country's current economic and monetary status and it serves to distinguish the investment and money flow into or out of the particle economy other major fundamental news that can impact currency markets include financial crisis political events or geopolitical disorders that are random and can occur unannounced at any time interest rates are being decided and announced by central banks central
bank's or reserve banks are the financial institutions that oversee the operation of the banking and monetary system within their particle economies monetary policy is the main to that central bank's used to control interest rates and currency values the Mandate of all central bank's is very similar with a focus on low inflation currency stability economic growth and prosperity within an economy the interest rates that are being decided and announced by central banks are the rates for which the central banks lend financial capital to investment and commercial banks then the commercial and investment banks usually pass similar
rates and conditions to consumers as well that's how the big money flow of pouring and purchasing is regulated to put in an economy there are different types of interest rates being used by many economists around the world the Lombard rate is for short-term liquidity loans to commercial banks and other rates are called repo rate or discount rate in Canada the main interest rate is called overnight rate in the United States it's federal funds rate in eurozone its main refinancing rate in the UK it's official bank rate in Australia cash right and in Switzerland its liberal
eight liber8 actually means London interbank offer trade and is being used by Swiss National Bank the rate decisions are usually priced into the market as central banks often give hints for the monetary policy directions the final interest rate is being decided according to the other macroeconomic indicators a general thumb of rule says that if there are inflationary pressures in an economic the central bank inclines towards raising its interest rates the higher interest rates are attractive for investors as they seek to gain financial benefit from their investments raising interest rates is a tightening policy designed to
slow down spending and to reduce inflation conversely a cut in the interest rates means that more money is available for consumer spending which encourages more borrowing and has an expansionary effect and a positive impact on economic growth an interesting sight to check the current interest rates of many economies is trading economics where you can compare a list of countries and their current economic situation on this side you can just click on the interest rate and the countries will be sorted from the highest rate to the lowest this nice comparison can tell you how each economy
is doing and how attractive it is for investors from traders perspective if the economy is doing well and the inflation is higher than the central bank target then it is probable that the central bank might increase interest rates if they do so the currency value also goes up on the other side if the central bank goes into a cutting crude cycle then the currency value goes down this is the core understanding how traders can capitalize on the market moves let's switch it back to Forex factoring and on the last note please bear in mind that
any significant deviation in current reading compared to the expected figures and also compared to the previous print in in correction can have a significant market-moving potential there is an increased volatility and a low liquidity in the markets on the targeted currencies during these scheduled releases it is highly advisable to be very cautious while trading and to have a proper plan and a maximum control of your positions that's about it for now thanks for your attention and remember to try it safe Cheers [Music]
