How to Trade Foreign Currency: How to Calculate Rates?

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The board of directors of every central bank regulates the monetary policy of the respective country.  The central bank also controls the short-term interest rates at which a bank can borrow from others.  These banks will restrict inflation by increasing prices.  The central banks also encourage the flow of money in an economy.

These economic indicators will give you an idea of the bank’s decision:

• The Consumer Price Index(CPI)
• Consumer spending
• Employment levelsSubprime market
• Housing market

How to Predict Central Bank Rates?

By following the economic indicators, a trader can better predict changes in interest rates.  If these indicators improve, the economy will improve, and the rates may be slightly raised. But if there is a slight increase in these indicators, the rate will be the same.  If the indicators decrease, the rates will be cut to urge money borrowing.

Except for these indicators, some other factors that can be used to predict the changes are:

• Watching for major announcements
• Analyzing forecasts

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How to Trade Foreign Currency