Hi guys, Just a quick question, if the Fed decides to increase the interest rate , how will that effect the Greenback?
USD should go up. The day it happens there should be spikes. Then a retrace. Then possibly a sustained rise in the value of the USD against all other currencies.
But who knows.
In general when a country raises interest rates that currency usually rises in value.
I’d advise against rjmah’s opinion here somewhat. Yes- there will most likely be a “spike” on “the day it happens”…but, currency markets are forward looking. Rate hikes for any single instrument are priced in WAYYYYYY before the actual hike happens.
Pull up any chart of a high-yield currency vs. low-yield- it doesn’t move straight up from left-to-right. Just b/c an interest rate differential may yield a positive roll on a daily basis, doesn’t mean market participants simply buy and hold forever.
That’s why I said “who knows” But , when interest rates are raised in a country , their currency usually goes up in value.
Is that not true?
Maybe I am mistaken .
Thanks for the input
Like forex unlimited said, interest rate changes are usually priced in well before any announcement. Its rare for the market to get caught out and rarer for policy makers to do the unexpected
I don’t think trading should be based on what the Feds say interest rated will be. Price either goes up or down and charts will give the clues as to what’s going to happen anyway.