When it comes to forex markets, there’s one factor that trumps anything else. Many people may think economic indicators can greatly move markets. Of course, you’ll often see stories about wages, prices, etc. making a big impact.
Interest rates, however, play a major role in these market movements. Looking at it, a job report may have a big impact on FX currency pairs. But it has such an impact because of how the report can influence interest rates.
Central bankers meet almost once a month (depends on schedule from one central bank to another). The central bank’s monetary policymaking staff assesses the economy at such meetings.
Assessment requires wages, labor market, GDP growth, etc. As you can see, these economic indicators tend to influence decision-making.
Thus, while economic indicators might seem to have a big impact in one way, the reason behind this impact is how they can shift interest rate expectations.
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Trading is a business around the world. Currencies of different countries are traded in Forex. And depending on these currencies understand the economic situation of each country. The interest rate is an economic condition that can make a currency strong and weak.
The interest rates are important in forex because when the interest rates rise, the price of the national currency also rises and that currency gains value in the foreign exchange markets. The interest rates play a vital role and are important in the market movements.