Forex News and focusing about it according to Forex fundamental analysis are briefly discuss here and if you are interested in Forex fundamental must read.
Focus on the central banks
- Let’s say central bank is focused on inflation. If the central bank is worried that inflation is too high, then we know that they are heading towards and interest rate increase. Hence the currency will increase in value.
- Central banks will focus on a maximum of two things at once and we know what they are focusing on and we can then figure out what tools they will use and how it will affect the markets
Your focus should always be on the central banks. Let’s say the central bank is focused on inflation. If the central bank is worried that the inflation is too high, then we know that they are heading towards an interest rate increase, hence, the currency will increase in value. And the reason that country’s currency increase in value when the central bank raises interest rate is because that country’s currency is no more attractive to investors. And this is because higher interest rates mean higher return on Capital. So, whenever the central bank raises interest rate, it makes its currency more attractive to investors. Investors prefer to invest in currencies with higher interest rates, because they can get higher interest on long term investments like fixed income investments. So, so investors are always attracted to countries that have higher interest rates. Now, the central bank will focus on a maximum of two things at once, and once we know what they’re focusing on, we can then figure out what tools they will use an will affect the market.
Now for the US Central Bank is usually focused on two things at once, and that is stimulating the economy and inflation. But most central banks only focus on a maximum of two things at once and mostly focus on one thing at a time, so most other central banks We’ll just focus on inflation. But for the US, it is different. The US must focus on stimulating the economy and inflation. So, whenever you get news, you should always ask yourself, how would this news affect the central bank’s views on the economy and interest rates? So that’s how you should look at the news, you should ask yourself, how will this news affect the central banks and their views on interest rates? Okay, knowing the next lecture we’ll be looking at why it is important to pay attention to the news
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