It has been a while since forex markets have been as focused
on interest rate differentials as they are now. With the exception of the Canadian Loonie and Australian Dollar,
all of the world’s major currencies are rising and falling almost entirely on the
basis of interest rates. Until
recently, the USD had forestalled its inevitable decline because interest rate levels
were significantly higher than in other countries, and foreigners remained
willing to finance the US trade deficit. Since the respective Central Banks of Britain and the EU began hiking
rates, however, the Euro and British Pound have risen while the Dollar has plummeted.
Meanwhile, the Japanese Yen is near historic lows because
carry traders are borrowing at low Japanese rates and investing abroad. On the flipside, the New Zealand Dollar has
surged, and the country is having a difficult time keeping investors away
because its interest rates are so high. Interest rates have achieved such force that even changes in expectations,
rather than changes in actual rates, are now more than capable of moving the
market significantly.
Read More: Back to Interest Rate
Expectations
Original post by Jimmy Atkinson and software by Elliott Back
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