Forex Market Outlook Central Banks Coming Back Into Focus

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How Central Banks Impact the Forex Market

The role of central banks in the forex market

Central banks are mainly responsible for maintaining inflation in the interest of sustainable economic growth while contributing to the overall stability of the financial system. When central banks deem it necessary they will intervene in financial markets in line with the defined “Monetary Policy Framework”. The implementation of such policy is highly monitored and anticipated by forex traders seeking to take advantage of resulting currency movements.

This article focuses on the roles of the major central banks and how their policies affect the global forex market.

What is a central bank?

Central Banks are independent institutions utilized by nations around the world to assist in managing their commercial banking industry, set central bank interest rates and promote financial stability throughout the country.

Central banks intervene in the financial market by making use of the following:

  • Open market operations : Open market operations (OMO) describes the process whereby governments buy and sell government securities (bonds) in the open market, with the aim of expanding or contracting the amount of money in the banking system.
  • The central bank rate : The central bank rate, often referred to as the discount, or federal funds rate, is set by the monetary policy committee with the intention of increasing or decreasing economic activity. This may seem counter-intuitive, but an overheating economy leads to inflation and this is what central banks aim to maintain at a moderate level.

Central banks also act as a lender of last resort. If a government has a modest debt to GDP ratio and fails to raise money through a bond auction, the central bank can lend money to the government to meet its temporary liquidity shortage.

Having a central bank as the lender of last resort increases investor confidence. Investors are more at ease that governments will meet their debt obligations and this heps to lower government borrowing costs.

FX traders can monitor central bank announcements via the central bank calendar

Major central banks

Federal Reserve Bank (United States)

The Federal Reserve Bank or “The Fed” presides over the most widely traded currency in the world according to the Triennial Central Bank Survey, 2020. Actions of The Fed have implications not only for the US dollar but for other currencies as well, which is why actions of the bank are observed with great interest. The Fed targets stable prices, maximum sustainable employment and moderate long-term interest rates.

European Central Bank (European Union)

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The European central bank (ECB) is like no other in that it serves as the central bank for all member states in the European Union. The ECB prioritizes safeguarding the value of the Euro and maintaining price stability. The Euro is the second most circulated currency in the world and therefore, generates close attention by forex traders.

Bank of England

The Bank of England operates as the UK’s central bank and has two objectives: monetary stability and financial stability. The UK operates using a Twin Peaks model when regulating the financial industry with the one “peak” being the Financial Conduct Authority (FCA) and the other the Prudential Regulating Authority (PRA). The Bank of England prudentially regulates financial services by requiring such firms to hold sufficient capital and have adequate risk controls in place.

The Bank of Japan has prioritized price stability and stable operations of payment and settlement systems. The Bank of Japan has held interest rates below zero (negative interest rates) in a drastic attempt to revitalize the economy. Negative interest rates allow individuals to get paid to borrow money, but investors are disincentivised to deposit funds as this will incur a charge.

Central bank responsibilities

Central banks have been established to fulfil a mandate in order to serve the public interest. While responsibilities may differ between countries, the main responsibilities include the following:

1) Achieve and maintain price stability : Central banks are tasked with protecting the value of their currency. This is done by maintaining a modest level of inflation in the economy.

2) Promoting financial system stability : Central banks subject commercial banks to a series of stress testing to reduce systemic risk in the financial sector.

3) Fostering balanced and sustainable growth in an economy : In general, there are two main avenues in which a country can stimulate its economy. These are through Fiscal policy (government spending) or monetary policy ( central bank intervention ). When governments have exhausted their budgets, central banks are still able to initiate monetary policy in an attempt to stimulate the economy.

4) Supervising and regulating financial institutions : Central banks are tasked with the duty of regulating and supervising commercial banks in the public interest.

5) Minimize unemployment : Apart from price stability and sustainable growth, central banks may have an interest in minimising unemployment. This is one of the goals from the Federal Reserve.

Central Banks and interest rates

Central banks set the central bank interest rate, and all other interest rates that individuals experience on personal loans, home loans, credit cards etc, emanate from this base rate. The central bank interest rate is the interest rate that is charged to commercial banks looking to borrow money from the central bank on an overnight basis.

This effect of central bank interest rates is depicted below with the commercial banks charging a higher rate to individuals than the rate they can secure with the central bank.

Commercial banks need to borrow funds from the central bank in order to comply with a modern form of banking called Fractional Reserve Banking. Banks accept deposits and make loans meaning they need to ensure that there is sufficient cash to service daily withdrawals, while lending the rest of depositors’ money to businesses and other investors that require cash. The bank generates revenue through this process by charging a higher interest rate on loans while paying lower rates to depositors.

Central banks will define the specific percentage of all depositors’ funds (reserve) that banks are required to set aside, and should the bank fall short of this, it can borrow from the central bank at the overnight rate, which is based on the annual central bank interest rate.

FX traders monitor central bank rates closely as they can have a significant impact on the forex market. Institutions and investors tend to follow yields (interest rates) and therefore, changes in these rates will result in traders channelling investment towards countries with higher interest rates.

How central banks impact the forex market

Forex traders often assess the language used by the chairman of the central bank to look for clues on whether the central bank is likely to increase or decrease interest rates. Language that is interpreted to suggest an increase/decrease in rates is referred to as Hawkish/Dovish . These subtle clues are referred to as “forward guidance” and have the potential to move the forex market.

Traders that believe the central bank is about to embark on an interest rate hiking cycle will place a long trade in favour of that currency, while traders anticipating a dovish stance from the central bank will look to short the currency.

For more information on this mechanism, read, “ Interest Rates and the Forex Market ”

Movements in central bank interest rates present traders with opportunities to trade based on the interest rate differential between two country’s currencies via a carry trade . Carry traders look to receive overnight interest for trading a high yielding currency against a low yielding currency.

Learn more about forex fundamentals

  • DailyFX provides a dedicated central bank calendar showing all the scheduled central bank rate announcements for major central banks.
  • Keep up to date with crucial central bank announcements or data releases happening this week via our economic calendar .
  • Data releases have the ability to make significant moves in the FX market but with increased volatility, it is important to manage your risk accordingly by learning how to trade the news .
  • To learn more about forex trading and get your foot in the door of successful trading, download our free New to Forex guide .

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

Update on COVID-19 Impacts on the Economic Outlook

It’s been a month since I wrote a Perspective outlining a thought-framework on the economic transmission of COVID-19. In fact, it didn’t even have a name then. It’s now worth revisiting that framework with the benefit of some data and hindsight.

Financial markets are sitting at the nexus of peak uncertainty. News is rapidly evolving, literally from one day to the next. In the January Perspective, I made several points that have since been reinforced.

  1. The SARS experience showed that opaqueness surrounding the spread of the virus and its impact had the potential to worsen in the weeks ahead.
    • Check. This has lived up to expectations.
  2. Markets always fear what they cannot accurately measure.
    • Check. The VIX has surged north of the 40-threshold, consistent with the rapid stock market correction of 10 to 12% that occurred in just 5 days.
  3. Along this vein, we noted to expect bouts of volatility will persist.
    • Check. This has a low probability of abating in the very near time until data can confirm successful containment within some of the highly impacted regions. This could then become a signal that the same success can be achieved in North America, imparting a relatively short-lived shock on corporate earnings and the economy.

Also in the January Perspective, three pathways were identified to help monitor the transmission and depth of economic impacts. The first two pathways would be dependent on the success of China and other countries to limit its spread, combined with consideration of the economic reach of the impacted regions. This has evolved into largely a bad news story, with some glimmers of hope.

On the latter, China’s aggressive quarantine measures created a large near-term hit to economic activity. Early reads of February data are confirming a deep, unprecedented downturn. China’s manufacturing PMI went into a free fall, hitting 35.7 in February. This is lower than the financial crisis experience (38.8). But, we hope this will mark the trough. The rapid decline in reported new virus cases is already prompting Chinese authorities to attempt to normalize operations by the end of this quarter. Absent another large breakout elsewhere in the country, we estimate that China’s economy will contract in the first quarter by roughly 2.5% annualized. This would mark a first in the modern history of China’s GDP data.

If that’s the ‘good news’, now let’s turn to the bad news. Containment of COVID-19 remains elusive outside of China (Chart 1). There have been significant breakouts in South Korea, Japan, Iran and surrounding regions. The rapid spread of the virus in Italy became the canary in the coal mine for other parts of Europe. And North America is now on high alert, with reports trickling out of an increase in confirmed COVID cases along the western United States. Canada is also seeing the number of confirmed cases tick up within major cities.

Although the number of new cases in North America remain low at this stage, it no longer matters. The fear has set in within financial markets for the potential of global supply chain disruptions. This supply-side shock could morph into a demand shock as fear and quarantine measures unravel household and business confidence.

With the benefit of time to prepare and learn from the Chinese experience, our adjusted baseline forecast assumes countries will succeed in containing impacts to a one-to-two month shock. However, it will be weeks before countries will be able to evidence success on this front.

How have our forecasts migrated?

It’s important to first remind ourselves that the economic impacts are not from the mortality rate of the virus, but rather from strong government and business measures to contain the virus via quarantines and other restrictions, be it mandated or voluntary.

Based on the impacted regions and their mitigating responses to date, the impact on our global growth forecast will be at least 40 basis points lower than our baseline forecast in December. This equates to a 2.7% growth rate. Admittedly, this estimate remains a moving target that assumes economic activity begins to largely normalize within the second quarter and only time will tell (Chart 2).

As for the U.S. and Canada, we have done preliminary estimates by analyzing four main economic channels.

  1. Tourism and travel
  2. Supply chains via intermediate exports and imports
  3. Terms of trade via commodity and currency movements
  4. Market sentiment via risk premiums

Of the four, assumptions that underpin the latter carry the most significance in our models. It’s also perhaps the least predictable. Unlike the U.S., Canada bears an additional negative weight from the terms of trade shock, marked by plummeting commodity prices and a relatively resilient currency that’s offering little offset (Chart 3). Finally, the travel and supply chain links are lower for the U.S. than they are in Canada as well, largely because Canada is a small, open economy that relies far more on commodities and goods exports relative to its southern neighbor. Putting the pieces together, we have marked down the Canadian forecast in the first quarter by 70 basis points (to 0.8% annualized), and that of the U.S. by 50 basis points (to 1.4%). Given that the adjustment period for both countries is occurring in March, the weak hand-off into the second quarter causes the rebound to be distributed into the following two quarters (Q2 and Q3). However, make no mistake about it, our baseline currently anticipates that both countries will bounce back to life as the virus threat abates over the spring months.

Of the two countries, we have a bit more confidence on the forecast path for the U.S. relative to Canada. The U.S. economy has proven to be the steady-Eddie of the world these days. Real GDP growth has turned in a 2% performance for three straight quarters, sometimes outstripping peer countries by a wide margin. And, excluding the hit from the production shutdown at Boeing, momentum in the first quarter was again looking solid around this mark before the virus came into focus. There are also some big outperformers emerging in the data. Residential investment is clocking in north of 10% in the first quarter, despite consumer spending holding near the 2% mark. The bottom line is that the U.S. was standing on firm ground before the virus shock came into focus. This supports the notion that any economic recovery should parallel historical experiences of being V-shaped.

Canada, on the other hand, is standing on a much thinner growth-cushion, coupled with heightened household financial risks. Of the past five quarters, only one has meaningfully exceeded the one-percent mark for real GDP growth. With GDP per capita languishing, much of the expansion hinges on a heavily-indebted consumer and over-heated housing market. Maintaining household confidence carries far more urgency in Canada, particularly since a low yield environment and a solid labor market have not been a positive enough backdrop to prevent a rise in insolvency rates, particularly in Ontario. As we’ve written ad nauseum in the past, government and central bank policies need to be proactive not reactive, because of the potential for elevated debt levels to ignite an economic tailspin. So, if history comes into play, Canada should mirror a v-shaped rebound in activity as virus-fears abate, but this materially depends on the confidence channel remaining defiant in the face of mounting risks.

Government spending to the rescue?

Given the recent depth and breadth of financial market angst, expectations have become heavily rooted in central banks riding to the rescue by cutting rates. In fact, the market has priced at least three rate cuts by the Bank of Canada and the Federal Reserve over the next twelve months. We don’t agree with this view but understand the market’s logic. In the absence of governments acting proactively, markets turn to the central bank as the only game in town that can respond swiftly, even if the policy action itself may prove to have limited effectiveness.

Monetary policy is generally not highly effective in resolving supply-side shocks. Rather, its first order of business should be to address liquidity strains to prevent the amplification of the financial shock. In contrast, fiscal policy is effective when targeted at the source of the supply shock. However, what we are witnessing today is extremely complex because the global reaction to quarantine and restricted operations risks a strong fear-based response on the demand side. If the disruption is believed to not be temporary or have a ‘contagion’ effect to household sentiment, then monetary policy needs to step in, but only in coordination with fiscal stimulus. It cannot do the heavy lifting and must act as a partner.

This is exactly what’s already occurring elsewhere. Several governments within virus-impacted countries are moving quickly to announce financial support, largely oriented to the most vulnerable areas of the economy: small businesses, households and the services sector (tourism and transportation in particular). We would expect no less from the U.S. and Canada should the virus materially impact the ability to conduct business or interrupt income for households, particularly those who are reliant on hourly wages. This assumption of fiscal assistance is embedded within our forecast.

Among those countries that are engaging in emergency fiscal stimulus, the amounts vary but some are substantial at 1% or greater as a share of GDP (Table 1). Although U.S. Congressional leaders are drafting an emergency spending bill that would allocate $4-$8 billion to combat the spread of COVID-19, this is not ‘fiscal stimulus’ in the true sense. These are funds necessary to support healthcare operations, supplies and worker preparedness, but are not fiscal stimulus supporting vulnerable businesses and households. In an interesting twist, economists have long noted that government fiscal stimulus should be playing a larger role in supporting the economy relative to monetary policy given the low level of interest rates. This virus is incenting exactly that. The challenge for governments is to act swiftly and decisively to shore up confidence and mitigate negative income impacts. In contrast, the primary focus of the central bank should be to ensure liquidity and credit support should market stresses become apparent.

What if we’re wrong?

Forecasting in the eye of the storm requires a strong dose of humility. The rapid evolution of events creates difficulty in hitting a moving target. As evident from the above statements, forecasters must embed a high degree of subjectivity. Uncertain times like this call for scenario analysis that can at least offer potential upper and lower bound estimates as events evolve.

On that front, we’ve laid out two alternative scenarios. The first involves a more entrenched economic weight over a full quarter in North America. This would likely result in a flat economic performance in the U.S. and quite possibly a technical recession in Canada. This scenario is next in line to unseat our current view should there be a larger spread of the virus within major urban centers that forces similar government and corporate responses as seen abroad. The second scenario is a worst-case outcome, reflecting a pandemic with long lasting economic distortions extending three full quarters. This would surely turn into a recession within both the U.S. and Canada, as well as globally (Charts 4 and 5).

In the one-quarter scenario, it’s presumed that firms resist layoffs due to the temporary nature of the economic shock. Hourly wage workers would still impacted due to greater vulnerability of interrupted income opportunities, but salaried employees are largely shielded and maintain a steady income flow. In contrast, the three-quarter pandemic makes this position untenable for employers. Wider scale layoffs would ensue, and unemployment rates would rise by several percentage points in each country.

Canada would be at a clear disadvantage in this scenario, as the shock to heavily indebted households would lead to a more scarred economic landscape. However, both history and the recent experience of China suggest this is a low-probability outcome and is not currently in our line of sight.

Bottom line

Forecasting such a rapidly changing environment is risky business. The near-term forecast will embed wider than usual error, but it’s important not to focus on point estimates and instead pull the lens back. History supports a rebound once the fog of uncertainty lifts. Whether that’s in one month or two months does not change this point. The Federal Reserve and the Bank of Canada stand ready to act and are likely to do so with at least one rate cut should market nerves remain frayed. But, governments need to do the heavy lifting if risk-off behavior within corporate America and Canada causes income disruptions, places the health of small businesses at risk and undermines broader household confidence. In fact, financial markets may draw comfort in knowing that governments have an action plan that can be quickly executed in advance of these disruptions. Transparency could take some pressure off central banks to be thought of as the only game in town that can quickly mobilize.

EUR/USD News (Euro US Dollar)

EUR/USD extends slump, approaches 1.0800

The EUR/USD pair is extending its slide to fresh weekly lows as speculative interest continues to choose the greenback in a highly uncertain world.

Latest EURUSD News

EUR/USD prints fresh weekly lows near 1.0800 on US dollar strength

EUR/USD Price Analysis: Euro trading in 5-day’s lows near 1.0850 level

EUR/USD: Favoring additional declines on a break below 1.0890

Technical Overview

The EUR/USD pair is pressuring the 61.8% retracement of its latest bullish run, maintaining its negative bias ahead of the Asian opening. In the 4-hour chart, the pair is extending its slide below all of its moving averages, with the 20 SMA moving below the larger ones, although all of them still confined to a tight range. Technical indicators in the mentioned chart stand at daily lows although losing their bearish strength. Anyway, the risk remains skewed to the downside, with the market looking to re-test the yearly low at 1.0635.

Support levels: 1.0810 1.0770 1.0725

Resistance levels: 1.0850 1.0890 1.0940

Fundamental Overview

While movements are not as wild as those witnessed last week, market players still prefer the dollar over most of its rivals, even with US data showing the economic scenario continues to worsen. The key macroeconomic figure released this Thursday was the US unemployment claims, which jumped to 6.648M almost doubling the market’s expectations. Also, the Challenger Job Cuts report showed that US-based employers announced 222,288 cuts in March, up 292% from February. The numbers are just the tip of the iceberg on how the coronavirus pandemic is hitting the economy.

The final readings of March Markit Services PMI for the EU and the US are scheduled to be out this Friday, with those in the Union expected to be downwardly revised. The US will also release the official ISM Non-Manufacturing PMI, expected at 44 from 57.3 previously. The country will also release the March Nonfarm Payroll report and is expected to have lost 100,000 ´positions. The unemployment rate is seen jumping from 3.4% to 3.8% while wage growth is seen up by 0.2% MoM and by 3.0% YoY. Given that data was compiled to mid-March, it won’t fully reflect the current situation of the labor market, and may have a limited effect on currencies.

Big Picture

THEMES AFFECTING THE EUR/USD

SPECIAL WEEKLY FORECAST

EUR/USD Forecast: Corrective rebound doesn’t change the doom picture

The EUR/USD pair has staged a substantial recovery this past week, recovering toward the 1.1000 price zone after falling to 1.0635 at the beginning of the week, its lowest since April 2020.

FXS Signals

Latest EURUSD Analysis

Latest EURUSD Analysis

EUR/USD extends slump, approaches 1.0800

The EUR/USD pair is extending its slide to fresh weekly lows as speculative interest continues to choose the greenback in a highly uncertain world.

GBP/USD falls below 1.24 amid worrying UK coronavirus figures, USD strength

GBP/USD has reversed its early gains and trades below 1.24. UK coronavirus deaths are close to 3,000 and the greenback is gaining ground amid a worsening market mood.

Bulls and bears face-to-face on the crypto board

The XRP/USD pair is on the verge of a confrontation between the two sides of the market. Bitcoin remains weak against Altcoin despite yesterday’s rise. Negative market sentiment shapes a technical floor and could trigger an opposite sentiment signal.

Gold: XAU/USD bounces and challenges $1615/oz

Gold is consolidating the bull-run stemming from the 2020 lows while trading above the main DMA (daily simple moving average).

USD/JPY consolidates, for now, as COVID-19 takes hold of Japan

USD/JPY is trading at 107.87, +0.67%, and moving between 107.01 and 108.09 while the markets take a breather and a step back from a chaotic start to the year and assess the damage and outlook for the next quarter.

Majors

Cryptocurrencies

Signatures

Influential Institutions & People for the EUR/USD

The Euro US Dollar can be seriously affected by news or the decisions taken by two main central banks:

The European Central Bank (ECB)

The European Central Bank (ECB) is the central bank empowered to manage monetary policy for the Eurozone and maintain price stability, so that the euro’s purchasing power is not eroded by inflation. The ECB aims to ensure that the year-on-year increase in consumer prices is less than, but close to 2% over the medium term. Another of its tasks is one of controlling the money supply. The European Central Bank’s work is organized via the following decision-making bodies: the Executive Board, the Governing Council and the General Council. Christine Lagarde is the President of this organism.

The Federal Reserve Bank (Fed)

On the other hand we found The Federal Reserve System (Fed) wich is the central banking system of the United States. Fed has two main targets: to keep unemployment rate to their lowest possible levels and inflation around 2%. The Federal Reserve System’s structure is composed of the presidentially appointed Board of Governors, partially presidentially appointed Federal Open Market Committee (FOMC). The FOMC organizes 8 meetings in a year and reviews economic and financial conditions. Also determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth.

Christine Lagarde

Christine Lagarde was born in 1956 in Paris, France. Graduated from Paris West University Nanterre La Défense and became President of the European Central Bank in November 1st 2020. Prior to that, she served as Chairman and Managing Director of the International Monetary Fund between 2020 and 2020. Lagarde previously held various senior ministerial posts in the Government of France: she was Minister of the Economy, Finance and Industry (2007–2020), Minister of Agriculture and Fishing (2007) and Minister of Commerce (2005–2007).

Jerome Powell

Jerome Powell took office as chairman of the Board of Governors of the Federal Reserve System in February 2020, for a four-year term ending in February 2022. His term as a member of the Board of Governors will expire January 31, 2028. Born in Washington D.C., he received a bachelor’s degree in politics from Princeton University in 1975 and earned a law degree from Georgetown University in 1979. Powell served as an assistant secretary and as undersecretary of the Treasury under President George H.W. Bush. He also worked as a lawyer and investment banker in New York City. From 1997 through 2005, Powell was a partner at The Carlyle Group.

ECB NEWS & ANALYSIS

FED NEWS & ANALYSIS

About EUR/USD

The EUR/USD (or Euro Dollar) currency pair belongs to the group of ‘Majors’, a way to mention the most important pairs in the world. This group also includes the following currency pairs: GBP/USD, USD/JPY, AUD/USD, USD/CHF, NZD/USD and USD/CAD. The popularity is due to the fact that it gathers two main economies: the European and American (from United States of America) ones. This is a widely traded currency pair where the Euro is the base currency and the US Dollar is the counter currency. Since the EUR/USD pair consists of more than half of all the trading volume worldwide in the Forex Market, it is almost impossible for a gap to appear, let alone a consequent breakaway gap in the opposite direction.

Normally, it is very quiet during the Asian session because economic data that affects the fundamentals of those currencies is released in either the European or U.S. session. Once traders in Europe get to their desks a flurry of activity hits the tape as they start filling customer orders and jockey for positions. At noon activity slows down as traders step out for lunch and then picks back up again as the U.S. comes online. If there is important U.S. data we can expect quiet markets just ahead of the number. U.S. economic news have the ability to either reinforce an existing trend or reverse it depending on by how much it missed or beat expectations with the EUR/USD news. By 5:00 GMT liquidity leaves the market once again as European traders close out positions and head home.

GBP/USD

The GBP/USD (or Pound Dollar) currency pair belongs to the group of ‘Majors’, a way to mention the most important pairs worldwide. This group also includes the following currency pairs: EUR/USD, USD/JPY, AUD/USD, USD/CHF, NZD/USD and USD/CAD. The pair is also called ‘The Cable’, reffering to the first Transatlantic cable that was crossing the Atlantic Ocean in order to connect Great Britain with the United States of America. This term was originated in the mid-19th century and it makes GBP/USD one of the oldest currency pairs in the world.

The popularity of the Pound Dollar is due to the fact that represents two strong economies: British and American (from United States of America). The Cable is a widely observed and traded currency pair where the Pound is the base currency and the US Dollar is the counter currency. After the result of the Brexit referendum, where the majority of the British voted to abandon the European Union, GBP/USD has been suffering some turbulence in the Forex market as a consequence of the associated risks of leaving the single market.

USD/JPY

The USD/JPY (or US Dollar Japanese Yen) currency pair is one of the ‘Majors’, the most important pairs in the world. Japanese Yen has a low interest rate, normally used in carry trades, that’s why is one of the most trades currencies worldwide. In the USD/JPY the US Dollar is the base currency and the Japanese Yen is the counter currency. The pair represents American (from United States of America) and Japanese economies.

Trading the USD/JPY currency pair is also known as trading the “ninja” or the “gopher”, although this last name is more frequently used when reffered to the GBP/JPY currency pair. The US Dollar Japanese Yen usually has a positive correlation with the following two pairs: USD/CHF and USD/CAD. The nature of this correlation is dued to the fact that both currency pairs also use the US Dollar as the base currency, such as USD/JPY. The value of the pair tends to be affected when the two main central banks of each country, the Bank of Japan (BoJ) and the Federal Reserve Bank (Fed), face serious interest rate differential.

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Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading and seek advice from an independent financial advisor if you have any doubts.

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