Central Banks


A flurry of major central bank activity has dominated the markets in recent weeks as we approach the end of a roller-coaster year for the markets. This barrage of December policy decisions began last week with the Reserve Bank of Australia (RBA), Bank of Canada (BoC), and European Central Bank (ECB). The roster continued this past week with the US Federal Reserve, Swiss National Bank (SNB), and Bank of England (BoE). Finally, next week will round out the major central bank decisions of December and of the entire year with the Bank of Japan’s critical policy meeting early in the week.
As might have been expected, the most dramatic market reaction to the recent parade of central banks occurred as a result of the hawkish Fed decision and the dovish-leaning ECB. The dollar surged sharply, which prompted a steep dive for gold prices. At the same time, the EUR/USD, which had already been reeling from a longer-than-expected QE extension by the ECB, plunged dramatically on Fed-driven dollar strength. The currency pair swiftly broke down below major support around the 1.0500 level, which has opened the way towards a potential target at parity.

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the world interest rates table

The World Interest Rates Table reflects the current interest rates of the main countries around the world, set by their respective Central Banks. Rates typically reflect the health of individual economies, as in a perfect scenario, Central Banks tend to rise rates when the economy is growing and therefore instigate inflation.


Know more about central banks

It is evident that during these past weeks, centrals banks have acted, as expected, as major player in the Forex markets. But, what is a central bank? Do you really know what are its functions?. We’ve gathered some educational content to answer all your questions about central banks policies and their important role on the forex markets. The Main Players In The Forex Market: The role of central banks tends to be diverse and can differ from country to country, but their duty as banks for their particular government is not trading to make profits but rather facilitating government monetary policies (the supply and the availability of money) and to help smoothen out the fluctuation of the value of their currency (through interest rates, for example).The majority of developed market economies have a central bank as their main monetary authority. It is evident that during these past weeks, centrals banks have acted, as expected, as major player in the Forex markets. But, what is a central bank? Do you really know what are its functions?.
The main tool of central banks is the interest rate, from which rates by commercial banks are set. By raising and lowering interest rates, the central bank de facto controls the country's economy and causes severe movements in the financial market. If we look at the distribution of central banks, depending on who is the owner, we find that there are three groups. Central Bank (CB) in private ownership (an example is - Switzerland or the USA), many other CB are in the hands of the state and the last option is called mixed ownership (eg. Japan). Banks. They handle Forex transactions in high volumes that often determine the future movements of financial markets. Currently, the five largest banks in the world hold almost 55% of the order volumes of the financial market. The minimum transaction in the interbank platforms is 10 million, the equivalent of 10 lots. Banks, of course, are trading without leverage, and utilize a variety of trading strategies from High Frequency Trading, latency trading, and arbitrage trading to long-term trading strategies.
The majority of developed market economies have a central bank as their main monetary authority. The role of central banks tends to be diverse and can differ from country to country, but their duty as banks for their particular government is not trading to make profits but rather facilitating government monetary policies (the supply and the availability of money) and to help smoothen out the fluctuation of the value of their currency (through interest rates, for example). Central banks hold foreign currency deposits called "reserves" also known as "official reserves" or "international reserves". This form of assets held by central banks is used in foreign-relation policies and indicates a whole lot about a countries' ability to repair foreign debts and also indicates a nation's credit rating. While in the past reserves were mostly held in gold, today they are mainly held in Dollars. It is common for central banks nowadays to possess many currencies at once. No matter what currencies the banks own, the Dollar is still the most significant reserve currency.

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