The FX market is the most liquid market to trade globally. Like other markets, Forex currencies are volatile and driven by external factors.
In this report by PXBT — a new Forex and CFD broker seeking to become the go to broker for traders globally — looks into what those external factors are.
Why central banks release statements
FX, which stands for foreign exchange, represents the trading of currencies from countries around the world. These currencies are particularly sensitive to central bank statements.
Central banks are responsible for maintaining financial stability through monetary policy and oversight over regional banks within each country. Central banks utilise tools like interest rates, currency issuance, and quantitative easing or tightening to influence external factors such as inflation or employment rates.
Central bank statements reveal a lot about the strength of a country’s national economy and the influence central banks have over the economy. As such, central bank statements can have a powerful impact on the supply, demand, and volatility of the currencies they issue.
What is the impact of central bank statements
The statements made by central banks can have a dramatic impact on market valuations. For example, a hawkish tone could cause bearish sentiment as traders anticipate tighter monetary conditions, while dovish remarks could cause bullish sentiment as traders prepare for lax monetary conditions.
Central bank statements also include important signals on interest rates and the intention to raise or lower such rates. Increases in interest rates decrease the demand for credit and lending, which can slow economic growth. Decreases in interest rates can prompt more debt and borrowing, which can boost the growth of the economy.
Additional economic insights, such as inflation or unemployment data, are typically included as the rationale behind monetary policy changes. Transparency is critical to central banks maintaining trust in the public eye. This added transparency, however, gives traders a chance to speculate on monetary policy changes, contributing to currency volatility.
FX currency trading explained
Forex traders trade currencies in pairs. Examples of major currency pairs include the Euro trading against the United States dollar, or the US dollar trading against the Japanese yen. Minor and exotic currency pairings also exist, allowing traders the ability to diversify and speculate on the exchange rate of two different country’s currencies.
In addition to the factors mentioned around central banks, Forex currencies are sensitive to political stability, trade deficits, changes in international currency reserves, or global events. For example, the COVID 19 pandemic caused a flight to safety in the United States dollar. Immediately after, however, record low interest rates prompted investors to flee the US dollar in search of better trading opportunities.
When the United States Federal Reserve began hiking interest rates, the US dollar began to dominate markets again. At the same time, the Bank of Japan kept its ultra-loose monetary policies, causing JPY to decline to its lowest value against USD in over 30 years.
PXBT: The next big thing in FX trading
PXBT is a global broker set to be launched later this year. It will provide easy-to-use access to a range of Forex currency pairs, as well as CFDs like Indices and Commodities. The broker plans to utilise the top industry choice trading engine — MT5 — and release a proprietary trading platform for the new generation of traders later in the year.
PXBT will be regulated from day one and prioritise security. The broker will provide tailored services on a region by region basis, while focusing on Latin American and Southeast Asian markets. It also plans to offer some of the best trading conditions, including the industry’s lowest fees.
With PXBT, users can speculate on Forex markets and trade the daily fluctuations in the exchange rate between various currency pairs using leveraged long and short positions. With the information outlined above, traders can learn to gain an edge on the market and trade FX currencies with confidence.
Visit PXBT today and learn more about the next generation of CFD and Forex trading.
Contact Person: Mike Karkhalev
Company: PXBT Trading Ltd
Email: press@pxbt.com
Address: IMAD Complex, Office 3, Ile Du Port, Seychelles
