Discount rates for major world currencies
No one doubts the importance of Central Bank discount rates; their change is always an event that moves the trend of a currency pair in one direction or another. You can find out what the discount rate is for a certain currency using the informer presented below; it presents the most interesting trading tools.
This indicator has a direct impact on the exchange rates of national currencies; it to some extent regulates the availability of funds in the country’s domestic market.
An increase in interest leads to an increase in the cost of credit funds and, as a consequence, to an increase in the exchange rate of the national currency. Conversely, a decrease in the interest rate allows commercial banks to issue cheaper loans, but at the same time reduces the exchange rate of the national currency.
Often such a tool is used to combat inflation or to strengthen the state’s economy.
If you want to use discount rates as signals to open Forex trades, then you need to remember two simple rules:
A decrease in the indicator almost always leads to a reduction in the price of the monetary unit, while at the same time serving to stimulate growth in the stock market.
An increase in the indicator is usually the basis for a cash shortage and a strengthening of the national currency.
Changes in rates occur regularly, and they are announced in advance; announcements of such changes are presented in the Forex calendar . In addition to the date and time of news release, the calendar usually publishes experts’ assumptions in which direction the discount rate will change and what changes in the rate of the currency pair in question this may cause.
All you have to do is wait for the discount rate to be published and open a deal in the right direction.
In this case, one should take into account the power of influence of such news on the trend; there are several types of interest rates , but not all of them have an equally strong impact on exchange rates.