As you have probably already guessed fundamental analysis consists of so much more than a simple interest rate policy. There are so much more other things. And one of them is monetary policy of the country host of the currency in question.
- the interest rates;
- inflation level;
- money supply,
- bank reserve requirements;
- lending to commercial banks.
For us traders, changes in the monetary policies are not always met with open arms as they are always tied to changes in interest rates. That means that the support for the currency changes and the currency can perform differently from what we are used to. But we have already gone through the connection between trading and interest rates.
It is also important to note usually changes in monetary policies are not done sharply and drastically. Usually they are pretty restrained and very limited with that exact reasoning – changes in monetary policies are too influential.
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