Domestic interest has a direct influence on the price fluctuations of major currency pairs are related. Statistical relationship of the first to analyze based on the principle of "Money Smart followed a high interest rate." Large companies and institutions tend to produce their liquid assets in the currency of a country with a higher interest rate.
For example, suppose that the growth rate of the United States (U.S.) was 5.0% and was equivalent to a UK official interest rate is 4.75%. The two countries announced a new interest rate on the same day, the U.S. rate fell to 4.25%, while the UK interest rate rise of 5.75%, ie increase in of 1.5% relative for British interest rates
Suppose that ABC company is a company in the U.S. Importer or Exporter of durable goods for the U.S. and UK. After a increase in UK interest rates, it becomes more profitable for ABC for save the USD in storage UK banks, to benefit from the interest rate is higher. Therefore, ABC Company purchased 10 million units of the currency pair GBP / USD, to multiply the pound (GBP) and reduce Dollars (USD).
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