What’s the relation between foreign exchange and the bank? Simply put, no banks, no forex.
The market price in the forex market is very much related to the country bank interest rate.
If the bank of England cut the interest rate, what do you think about the economy in England? What if the Bank of England increase the interest rate? How would this interest rate affect the currency pair of GBP/USD?
Well, think of this way: Why does the bank need money? To invest in something to make profit right? If there is not sufficient money for investment, what would you do if you’re the bank CEO? Well, you want to have more people to put their money in saving account so that you can use that money to invest.
Therefore, when the bank of certain country increase the interest rate, it is a sign that the country is not having good flow of money to invest somewhere. So, the translation would be: weak economy in that particular country.
If you want to trade forex, you must know the pair you trade and the country news. If you know that the interest rate of England is being cut, then you know it’s good time to look for buy in GBP/USD.
Every month every country will announce their bank interest rate and that is a good indicator for you as a forex trader to know the direction of the pair that you want to trade with.
Go do some research and have some testing!
Have a great forex trading week! 
P/S: No post for this week. Not around. God bless.
how does one know which direction the banks are going to move a currency pair each day?
Hi Mike,
You won’t know..
What I mentioned in this post is about the bank interest. So, as a forex trader, you would want to look out for the country report. For example, if you want to trade the GBP/USD, you want to pay attention to England bank interest which will be probably different each month.
To trade a currency, you want to follow the strength of a currency on that month. You don’t just pay attention to one day. Example, Bank of England set higher interest in June, you may want to sell GBP/USD. However, there are other conditions as well before you sell.
The news will reflect the strength of a currency. So, pay attention to news and look for a opportunity to trade.
God bless.
WHEN YOU TALK ABOUT A BANK INCRESING THE INTEREST RATE ARE YOU TALKING ABOUT THE INTEREST THE BANK CHARGES FOR A LOAN OR THE INTEREST THE BANK PAYS ONE ON HIS SAVING ACCOUNT?
Hi Mike,
If you want to know more about the interest rate, you can go to:
http://www.bankofengland.co.uk/monetarypolicy/index.htm . You should be able to understand what I’m talking about.
God bless.