The Bank of England’s board members will come together on Thursday, June 15th, to announce England’s interest rate decision. This announcement will influence the pound, one of the world’s major currencies. The central bank is expected to keep interest rates unchanged at 0.25%.
On Friday, June 16th, it’s Japan’s turn to announce their interest rate decision. The Bank of Japan decision will impact the Japanese yen. The central bank is expected to keep interest rates steady at -0.10%.
What is an Interest Rate?
These central banks are revving up to decide on whether to change the charge on overnight loans. When the actual outcome is better than the forecast, this is good for the currency.
Policymakers usually drop hints as to what the decision will be in the run-up to the announcement, in order to ease investors into the transition.
Therefore, rate decisions are already priced into the market. The rate itself is actually overshadowed by the statement made by the board members, which focuses on predictions for future rate increases.
Both central banks are expected to hold interest rates steady.
How will this affect your portfolio?
If the central bank’s statements include positive outlooks for the economy, the respective currency should increase. However, if the statements are negative, the respective currency may decrease.
Remember, It’s the statement that matters! If you are a currency trader, this will be particularly important to you.
Interest rate decisions are paramount when considering the valuation of a currency.