We already talked about the changes in monetary policies and their effect on currencies and as a result trading overall. It is really interesting to see how one individual report can disrupt trading for a lot of people around the world. Interesting and very dangerous and occasions like that are messing with the exchange rates of the currencies and as a result can affect overall state of the economy around the world.
That can especially be seen in influence that USD has upon other currencies and other economies. Countries far away from USA and dollar are affected by it and there is nothing we can do about it.
Speeches on monetary policies are especially important and dangerous in that regard. No matter what question in going to be covered in a speech – interest rates, economic measurements and sentiment, overall outlook on the state of economy, changes in the policies – all of these news can be of two types. They can be hawkish and they can be dovish.
Hawkish is a piece of news or a banker who insists raising interest rates in order to fight inflation. In this regard raising the interest rates is put higher than anything else. There is no concern on whether the changes are going to disrupt employment rates or economic growth. Main goal here is to fight inflation with any means necessary.
Dovish are the bankers who are in favor of economic growth over high interest rates and tight economic policies. Dovish policies are the non-aggressive ones.
Interesting thing here is that sometimes bankers are displaying both of the policies at the same time – they want high interest rates together with economic growth. But in reality we are forced to choose between the two.
In case you are still wondering about hawks and doves – here is the video that is going to help you find answers to all the questions that you might still have.
