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INTEREST RATES

If there is an uncertainty in the market in terms of interest rates, then any developments regarding interest rates can have a direct affect on the currency markets. Generally, when a country raises its interest rates, the country's currency will strengthen in relation to other currencies as assets are shifted to gain a higher return. Interest rates hikes, however, are usually not good news for stock markets. This is due to the fact that many investors will withdraw money from a country's stock market when there is a hike of interest rates, causing the country's currency to weaken. Knowing which effect prevails can be tricky, but usually there is an agreement among the field as to what the interest rate move will do. PPI, CPI, and GDP have proven to be the indicators with the biggest impact. The timing of interest rate moves is usually known in advance. It is generally known that these moves take place after regular meetings of the BOE, FED, ECB, BOJ, and other central banks.

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