We already know that currency prices are affected by changes in a country’s interest rate.
We also know that interest rates are ultimately influenced by the central bank’s views on a country’s economy and price stability, which will affect the central bank’s monetary policy.
The central bank, like other institutions, also has a leader, which we call the governor or chairman of the central bank. Investors generally pay close attention to the speeches of important officials, including the governor or chairman of the central bank, because their speech usually reveals the future direction of the central bank’s monetary policy.
It is important for foreign exchange investors to learn about the possible changes in the central bank’s monetary policy. Fortunately, the central bank will communicate well with the market before its monetary policy changes.
The key is whether you understand the information disclosed by the central bank, which is not so simple.
So, next time you wait for Fed Chairman Ben Bernanke or European Central Bank President Draghi to deliver a speech, please listen carefully. Before the official speech, the most important thing is to check on the financial calendar of the professional foreign exchange website. The specific or approximate time of these important central bank officials’ speeches.
Although the central bank governor is not the only person who formulates the monetary policy of a country or an economy, we must not ignore the speech of the central bank governor.
It sounds a bit exaggerated, but you should understand the key points.
Not all central bank officials and central bank governors have the same status.
The speech of central bank officials will have a greater impact on the market, so after a speech or statement by a central bank official, please carefully observe the apparent fluctuations in the foreign exchange market.
Their speech may involve all aspects of monetary policy, such as raising interest rates, lowering or keeping interest rates unchanged, lowering or raising economic growth estimates, etc.
However, if you cannot hear their real-time speech, you should not be discouraged. At the same time when they make a speech or statement, the main media will do simultaneous live broadcasts, and professional foreign exchange sites will also do simultaneous text live broadcasts.
Currency analysts and professional foreign exchange traders will pay close attention to the content of the speech. They will carefully analyze the language and language of the speech or statement. When the speech involves interest rates, changes in current policy positions, etc., they will be particularly vigilant.
Just as the market will respond to economic reports or the publication of economic indicators, currency traders will also react to changes in central bank activities and monetary policy, especially when the central bank decides to exceed current market expectations. .
As the central bank’s decision-making transparency continues to increase, it is easier for us to predict that the central bank’s monetary policy may change in the future.
Nevertheless, there are still situations where the degree of central bank policy change will exceed or fall below market expectations. It is also in this situation that market volatility will be higher, and traders should also be more vigilant about the risk control of their opponent’s positions.