CentralBank Interest Rate And Its Impact On Currencies And The Commodities Market

CentralBank Interest Rate And Its Impact On Currencies And The Commodities Market

 

Currency Futures

The decision of the central bank to increase or lower the interest rate has an impact on the currency market. The futures traders that trade on currencies will watch the interest rate close to placing a long position on the currency market. When there is an increase in the rate of interest then this is positive for the currency market of that country. This is because when the rate of interest is high then this is linked to a high yield carry for those who are long on the position in that currency. This means that when there is an increase in the interest rate then this will lead to an increase in “buy” contracts for that particular currency. When there is a decrease in the interest rate by the central bank then this will cause an influx or new “sell” contracts in that particular currency.

Commodity Futures

The central bank’s decision to cut or increase the rate of interest also has an impact on the commodities market. When there is an interest rate change then this causes a change in the outlook of demand and supply for the commodities. Like for example an increase in the interest rate impacts the demand for oil and the companies will not be having enough money to spend on the energy products. This leads to an excess of the supply in the storage and this causes a fall in the oil prices. Similarly, when the interest rate is lowered then this supports demand for oil and this causes a bull rally in the oil.

The decision of the central bank should be paid closed attention to when trading in the futures market. The asset classes are impacted differently but there are predictable movements that can be seen. The interest rate announcements can be used to place long term or short term trades in the futures market. However, be aware of the Crypto Code scam.

Conclusion

The interest rate decision of the central bank is an important factor to consider when trading the futures market. Another important factor that should be paid attention to is earnings. One needs to forecast this value accurately to gain profits when trading the futures contracts. The bullish or the bearish move in a particular contract is dependent on the underlying assets potential to generate revenue. This is especially true when it comes to trading stock futures. Thus corporate earnings are watched closely because it is a major driving factor for the stock future prices.

 

 

 

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