Should Forex Traders Care about the Interest Rates? Yes.
Our Forex Signals
1 - month
Subscription
month
3 - month
Subscription
month
6 - month
Subscription
month
Lifetime
Subscription
Separate Swing Trading Group
month
Typically, higher interest rates increase a country’s currency value relative to countries that offer lower interest rates. The interest rate of a currency is arguably the most significant factor that determines the currency’s perceived value.
4
Payment methods
Trading platforms
Regulated by
Support
Min.Deposit
Leverage max
Currency Pairs
Classification
Mobile App
Min.Deposit
$100
Spread min.
Variables pips
Leverage max
100
Currency Pairs
40
Trading platforms
Funding Methods
Regulated by
FCA
What you can trade
Forex
Indices
Actions
Cryptocurrencies
Raw Materials
Average spread
EUR/GBP
-
EUR/USD
-
EUR/JPY
0.3
EUR/CHF
0.2
GBP/USD
0.0
GBP/JPY
0.1
GBP/CHF
0.3
USD/JPY
0.0
USD/CHF
0.2
CHF/JPY
0.3
Additional Fee
Continuous rate
Variables
Conversión
Variables pips
Regulation
Yes
FCA
No
CYSEC
No
ASIC
No
CFTC
No
NFA
No
BAFIN
No
CMA
No
SCB
No
DFSA
No
CBFSAI
No
BVIFSC
No
FSCA
No
FSA
No
FFAJ
No
ADGM
No
FRSA
71% of retail investor accounts lose money when trading CFDs with this provider.
Min.Deposit
$100
Spread min.
- pips
Leverage max
400
Currency Pairs
50
Trading platforms
Funding Methods
Regulated by
CYSECASICCBFSAIBVIFSCFSCAFSAFFAJADGMFRSA
What you can trade
Forex
Indices
Actions
Cryptocurrencies
Raw Materials
Etfs
Average spread
EUR/GBP
1
EUR/USD
0.9
EUR/JPY
1
EUR/CHF
1
GBP/USD
1
GBP/JPY
1
GBP/CHF
1
USD/JPY
1
USD/CHF
1
CHF/JPY
1
Additional Fee
Continuous rate
-
Conversión
- pips
Regulation
No
FCA
Yes
CYSEC
Yes
ASIC
No
CFTC
No
NFA
No
BAFIN
No
CMA
No
SCB
No
DFSA
Yes
CBFSAI
Yes
BVIFSC
Yes
FSCA
Yes
FSA
Yes
FFAJ
Yes
ADGM
Yes
FRSA
71% of retail investor accounts lose money when trading CFDs with this provider.
Min.Deposit
$10
Spread min.
- pips
Leverage max
10
Currency Pairs
60
Trading platforms
Funding Methods
What you can trade
Forex
Indices
Cryptocurrencies
Average spread
EUR/GBP
1
EUR/USD
1
EUR/JPY
1
EUR/CHF
1
GBP/USD
1
GBP/JPY
1
GBP/CHF
1
USD/JPY
1
USD/CHF
1
CHF/JPY
1
Additional Fee
Continuous rate
-
Conversión
- pips
Regulation
No
FCA
No
CYSEC
No
ASIC
No
CFTC
No
NFA
No
BAFIN
No
CMA
No
SCB
No
DFSA
No
CBFSAI
No
BVIFSC
No
FSCA
No
FSA
No
FFAJ
No
ADGM
No
FRSA
Your capital is at risk.
Min.Deposit
$50
Spread min.
- pips
Leverage max
500
Currency Pairs
40
Trading platforms
Funding Methods
What you can trade
Forex
Indices
Actions
Raw Materials
Average spread
EUR/GBP
-
EUR/USD
-
EUR/JPY
-
EUR/CHF
-
GBP/USD
-
GBP/JPY
-
GBP/CHF
-
USD/JPY
-
USD/CHF
-
CHF/JPY
-
Additional Fee
Continuous rate
-
Conversión
- pips
Regulation
No
FCA
No
CYSEC
No
ASIC
No
CFTC
No
NFA
No
BAFIN
No
CMA
No
SCB
No
DFSA
No
CBFSAI
No
BVIFSC
No
FSCA
No
FSA
No
FFAJ
No
ADGM
No
FRSA
71% of retail investor accounts lose money when trading CFDs with this provider.
Interest rate changes influence the forex market significantly. The changes can usually be made by one of the eight global central banks. The changes make immediate impacts on the market traders and hence understanding how to react as well as predict these moves will be among the first steps to making higher profits.
Basics of Interest Rates
For day traders, interest rates in the currency market are very crucial because, with a higher rate of return, more interest is accrued on the currency invested, which translates into a higher profit. However, market fluctuation is the only risk and can drastically hinder interest-bearing rewards.
How to Calculate the Rates
Usually, the central banks hike rates to control inflation as well as cut the rates in an effort to encourage lending and let the money into the country’s economy. Sometimes you can tell whatever the bank can decide by simply examining most relevant indicators such as employment levels, consumer price index (CPI), subprime market, consumer spending, and the housing market.
The relative strength, as well as weakness of those indicators, merely provides an excellent summary of the economic power. As the indicators improve, also the economy will perform well, and the rates will be raised or be kept the same if the improvement is of a small magnitude.
Besides, it’s possible to forecast a rate decision by merely analyzing forecasts and watching the significant announcements.
Major announcements when positive can be followed widely by traders who anticipate the Federal Reserve to raise interest rates, and hence have a short-term rally.
Analyzing predictions is also a way of predicting the interest rate decisions, and because they are anticipated, banks, brokerages, as well as professional traders, do have a consensus estimate.
Surprise Rate Sometimes Occurs
Traders can do the ultimate research, but sometimes central banks may have a surprise rate cut or hike. Therefore, whenever such scenarios happen, a trader has to be aware and understand the direction to follow.
In times of a hike, the currency appreciates meaning trades can buy, and when there’s a cut, traders probably sell then buy those currencies with high-interest rates.
After determining the market movement, it’s significant to act faster as speed is crucial when a surprise hits, and by so doing, maximum profits can be attained. Also, it’s good to watch for the volatile trend reversal.
One thing for sure, the currency doesn’t matter or does the direction matter, but with an interest rate cut or rate, the market is volatile – research is always crucial before any trade.
AvaTrade - Established Broker With Commission-Free Trades
- Minimum deposit of just 250 USD to get lifetime access to all the VIP channels
- Awarded Best Global MT4 Forex Broker
- Pay 0% on all CFD instruments
- Thousands of CFD assets to trade
- Leverage facilities available
- Instantly deposit funds with a debit/credit card
Conclusion
When banks determine their monetary policy, forex rates also move, and when they move, traders get the opportunity to make maximum profits. Therefore, it’s a no brainer for traders to analyze the central banks’ actions and follow the news releases. Reacting to the surprise rate moves with speed will only improve the trader’s chances of high profits.