Pull up any currency chart and you'll see a story but the chart never tells you why. Why did the British pound spend years recovering from a single referendum result? Why does the Japanese yen weaken when global risk appetite improves, and strengthen when investors get nervous? Why can two economies with similar GDP growth rates have currencies moving in completely opposite directions? The answer is never just one thing. Currency strength is the product of competing forces, some of which are slowmoving and structural, others fast and reactive. Understanding those forces is essentially what what is forex trading comes down to at its core not the mechanics of placing orders, but the underlying logic of why one currency is worth more than another at any given moment in time. Interest Rates Are the Gravitational Pull If you want to understand why capital flows where it does, start with interest rates. Money is, among other things, a search for yield. When a central bank raises rates, i...
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