interest rate

US interest rates hold a critical position in the global financial system, acting as a benchmark that influences economies and markets far beyond American borders. These rates, set by the Federal Reserve, dictate the cost of borrowing and the return on savings, shaping consumer spending, business investments, and economic growth. However, their impact doesn’t stop at the US economy. In a world where financial markets are deeply interconnected, changes in US interest rates send shockwaves across global markets, affecting everything from currency pairs to stock prices.

Key events: UK - BoE Interest Rate Decision (Sep) USA - Initial Jobless Claims USA - Philadelphia Fed Manufacturing Index (Sep) USA - Existing Home Sales (Aug) The S&P 500 ended a seven-day winning streak with volatile trading on Wednesday, as the Federal Reserve opted for a substantial 50 basis point rate reduction, the first such cut since March 2020.

Forex traders must understand the concept of interest rate parity (IRP), which links currency value fluctuations to interest rate differentials between countries. By examining the interest rate differences between two nations, investors can forecast future exchange rates. The theory is based on the relationship between the spot exchange rate and the forward exchange rate of two currencies. The core idea is that the forward exchange rate equals the spot exchange rate, adjusted by the ratio of the home country's interest rate to the foreign country's interest rate.

Understanding interest rates is fundamental to navigating the complexities of forex trading. Interest rates, which represent the cost of borrowing funds or the return on investment for lending capital, are pivotal economic indicators that shape monetary policy decisions and influence financial markets worldwide. Central banks wield significant influence over interest rates, using them as tools to regulate economic growth, control inflation, and manage employment levels.

Investors are preparing to conclude a prosperous year in the stock market. As of mid-November, the S&P 500 has surged by 18%, surpassing the 10% average price gain for the broad-market index. This upward trend has persisted despite Federal Reserve interest rate hikes, ongoing inflation, and geopolitical tensions, underscoring the unpredictable nature of the stock market.

Key events: USA - Average Hourly Earnings (MoM) (Aug) USA - Nonfarm Payrolls (Aug) USA - Unemployment Rate (Aug) USA - ISM Manufacturing PMI (Aug)   ISM Manufacturing Prices (Aug) US equities were on an upward trajectory as August came to a close, bolstered by the anticipation of Friday's employment report for the same month.

Derivatives are financial instruments that play a crucial role in modern financial markets, offering investors and businesses a wide range of benefits and opportunities. These instruments derive their value from an underlying asset, such as stocks, commodities, currencies, or indices, and are utilized for hedging, speculation, and managing investment exposure. Understanding the concept of derivatives and their various types is essential for navigating the complexities of the financial world effectively.

Key events: UK - Retail Sales (MoM) (Jun) Canada - Retail Sales (MoM) (May) On Thursday, both the S&P 500 and Nasdaq experienced declines due to the disappointing quarterly results of Tesla (NASDAQ: TSLA) and Netflix (NASDAQ: NFLX). However, the Dow managed to continue its positive streak for the ninth consecutive day, thanks to Johnson & Johnson (NYSE: JNJ) posting a strong annual forecast, which boosted its share prices.

The dot plot produced by the Federal Reserve has gained immense attention and scrutiny in global financial markets. Since January 2012, the Fed has periodically updated this scatter chart, making it the unofficial forecast of the US central bank's monetary policy, whether intended or not. Additionally, it serves as a valuable source of insights into dissent within the Fed's policy-making committee, despite its cryptic nature and the challenges associated with interpreting it accurately.

The US dollar is one of the most widely traded currencies in the world and plays a crucial role in international trade and finance. As a result, many factors can impact the value of the US dollar, including economic indicators, geopolitical events, and changes in monetary policy. Understanding the various factors that affect the US dollar rate is essential for investors, traders, and businesses who rely on the currency for their transactions.