It’s All About Interest Rates
November 7, 2006 by Trader Rich
Thanks to Daily Dopeness for mining this information and ~chaffcombe for providing the content. Here is what you should be clearly thinking about during each and every economic announcement at this point in time:
"Finally, 99% of market moves following economic announcements are based upon
perceptions on how the information may affect interest rates. If it’s bullish
for rates, the price goes up; if it’s bearish for rates, the price goes
down."
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I agree with this, assuming relatively stable economic conditions (ie when we are in an environment where inflation doesn’t risk destabilising the economy). In a scenario of high inflation and low growth, interest rates may rise sharply at the expense of growth. This can be toxic for bonds and equities and also negative for the home currency.
But generally, in most climates, the statement holds and cuts through many of the complexities of the market. In most cases, most of the time, the perceived interest-rate differential is king.