The purpose of fundamental forex analysis is to forecast the future value of a currency. Interest rates are a key element in that process. The US dollar interest rate and the euro interest rate outlooks are the first tier relationships in forex interest rate relationships. The tables below show the us dollar interest rate target for the FOMC, the euro interest rate target for the ECB and comparable forex interest rate targets for the next five most important central banks. Use these data for your foreign exchange currency forecasting.
The professional forex traders at GVI have assembled acomprehensive array of monetary policy indicators for those trying to anticipate interest rate moves as a factor in exchange rate movements.In banking, foreign exchange is the buying and selling of actual balances by financial institutions who daily execute the transfer of substantial amounts of funds from one currency to another. Interest rates are the cost of funds that are traded and thus affect the value of one currency relative to another. It is the role of Central Banks tocontrol the price of short-term money (e.g. overnight to 3-mo interest rates) via open market operations and control of the money supply. Central Banks use monetary policy to control inflation. Almost all central banks target inflation to one extent to another.
The price of long-term money (e.g. 2-yr to10-yr bonds) is determined by the marketplace and reflects the outlook of investors and borrowers for economic growth and inflation in the long term. Generally, hot money tends to flow from where money is cheapest to where yields are highest. Long-term investors tend to seek out the currencies with the highest real (inflation adjusted) yields, rather than the currencies with the highest nominal returns.