Interest rates have a huge impact on forex trading, and currently, central banks appear anxious to enact rate hikes as inflation pressures persist globally. This is perhaps most clear in New Zealand, where the RBNZ unexpectedly raised rates to a record high just a few days ago. This is also evident in Canada, as the BOC has signaled policy tightening in July, the result of a major economic turnaround that has been in the works over the past three months. At a time when high yielding currencies run a high risk of being liquidated if the stock market continues to tumble, knowing which central banks are still on track to raise interest rates and which are not will be key in determining which currencies under or outperform.
The chart below highlights which central banks we consider to have the most severe tightening bias and more importantly, which are the most likely to increase interest rates in the near term. While all of them have demonstrated a more hawkish stance, certain factors pertinent to their respective economies leave banks, such as the Bank of Canada, prone to earlier action.
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Forex Update: Which Central Banks are Still Raising Interest Rates?
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