Monetary policy and interest rate expectations play a central role in fundamental analysis as these determine the rate of return from holding a country's assets and therefore the demand for its currency. as mentioned in the previous section Central banks decision carry a major influence in this regard. Of course these decisions are based on a number of economic factor including overall growth inflation consumer spending and confidence and trade activity Among many others these data can be found in economic data bases online and press releases can be tracked using an economic calendar. Generally speaking consistent economic improvements and Expectations of strong performance would lead us Central Bank to tighten monetary policy . This involves decreasing the amount of money in circulation which then the value of the currency to go up or increasing interest rates these tools are employed in other to prevent the economic from overheating for inflation from spiking out of control. When traders sikhen security of improvements in economic data interest rate Hike expectation stand to build up and post the value of the currency hire even before the actual monetary policy decision in announced. On the other hand consecutive declines in economic performance food grains are Central Bank to ease monetary policy. They can either increase the amount of money in circulation which then causes the value of the currency to drop or by decreasing interest rates both of these moves are designed to encourage leading and spending which eventually translate to strong economic performance when traders CR prolonged weakness in economic data interest rate cut expectation grow and push the value of the currency lower even before the central policy decision is made. Central banks can also intervene in the foreign exchange market at the Swiss National Bank has been notorious for doing. These are very rare occasion when the central bank things that the currency is overvalued and is starting to take its toll on the country's export industry after all a higher currency value means that experts are relatively more expensive in the national market which would then Hath demand Central Bank and conduct currency intervention by selling a large amount of its local currency in order to derive its value down. Testimonials by Central Bank official also tend to influence forex market price action as these contain clues on what their next monetary policy most might be this is why Central bankers spit is are also market on the economic calendar usually as a top tier event when is the central bank had speaking. Minutes of policy meeting also carry weight in policy action , as these also provide hands on how the other members of the board think the economy is sharing and whether monetary policy adjustments are needed or not traders usually monitor when there is a change in bias and start pricing in in potential policy tightening or easing ahead of time. Thanks.
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