I am completely new to forex trading and have only been casually trading the stock market for 1/2 years. I am still in school studing Alevels in Economics, business studies… etc and still have limited knowledge, so please excuse mistakes or silly questions.
I was curious whether interest rate changes will have a significant effect on a currencys value. For example, on 10th June the Bank of England will be releasing their decision whether to increase or stick with the rate of 0.5%. If they do increase it to 1 or 1.5% will demand for the £ rise thus a higher exchange rate?
Would it rise significantly to profit from the GBP/USD for example?
I hope I expressed myself correctly and any help would be great! Thank yiu
Well if they do raise it to 1.5% there is going to be the mother of all spikes higher for the pound, but trying to predict such an event is rather difficult. When I started trading I was obsessed with trading the news. I would sit with my finger on the button, but in most cases there would be a move one way and then the other and I would get creamed! Thats whats called seat of your pants trading!
Anyway the answer to your question is 99% yes, but the forex market has a habit of doing the oposite to what everybody believes. If it stays the same but, the majority of the market expected a hike in rates then it could fall.
hope that helps, Im not that hot on fundamentals.
John