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The Who's Who of the Central Bank

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					The Who's Who of the Central Bank

We just learned that currency prices are affected a great deal by changes
in a country's interest rates.

We now know that interest rates are ultimately affected by a central
bank's view on the economy and price stability, which influence monetary
policy.

Central banks operate like most other businesses in that they have a
leader, a president or a chairman. It's that individual's role to be the
voice of that central bank, conveying to the market which direction
monetary policy is headed. And much like when Steve Jobs or Michael Dell
steps to the microphone, everyone listens.

So by using the Pythagorean Theorem (where a² + b² = c²), wouldn't it
make sense to keep an eye on what those guys at the central banks are
saying?

Using the Complex conjugate root theorem, the answer is yes!

Yes, it's important to know what's coming down the road regarding
potential monetary policy changes. And lucky for you, central banks are
getting better at communicating with the market.

Whether you actually understand what they're saying, well that's a
different story.

So the next time Ben Bernanke or Jean-Claude Trichet are giving speeches,
keep your ears open. Better yet, use the trusty BabyPips.com Economic
Calendar to prepare yourself before the actual speech.


While the central bank Chairman isn't the only one making monetary policy
decisions for a country or economy, what he or she has to say is only not
ignored, but revered like the gospel.

Okay, maybe that was a bit dramatic, but you get the point.

Not all central bank officials carry the same weight.

Central bank speeches have a way of inciting a market response, so watch
for quick movement following an announcement.

Speeches can include anything from changes (increases, decreases or
holds) to current interest rates, to discussions about economic growth
measurements and outlook, to monetary policy announcements outlining
current and future changes.

But don't despair if you can't tune in to the live event. As soon as the
speech or announcement hits the airwaves, news agencies from all over
make the information available to the public.
Currency analysts and traders alike take the news and try to dissect the
overall tone and language of the announcement, taking special care to do
this when interest rate changes or economic growth information are
involved.

Much like how the market reacts to the release of other economic reports
or indicators, currency traders react more to central bank activity and
interest rate changes when they don't fall in line with current market
expectation.

It's getting easier to foresee how a monetary policy will develop over
time, due to an increasing transparency by central banks.

Yet there's always a possibility that central bankers will change their
outlook in greater or lesser magnitude than expected. It's during these
times that marketing volatility is high and care should be taken with
existing and new trade positions.




Los Angeles Hawks vs. the New York Doves

Yes, you're in the right place.

Tonight's match puts the L.A. Hawks up against the N.Y. Doves.

You're in for a treat. Wait, what?!

Whoops sorry, wrong subject.

We really just meant hawks versus doves, central bank hawks versus
central bank doves that is. Central bankers can be viewed as either
hawkish or dovish, depending on how they approach certain economic
situations.

Central bankers are described as "hawkish" when they are in support of
the raising of interest rates to fight inflation, even to the detriment
of economic growth and employment.

For example, "The Bank of England suggests the existence of a threat of
high inflation." The Bank of England could be described as being hawkish
if they made an official statement leaning towards the increasing of
interest rates to reduce high inflation.

Dovish central bankers, on the other hand, generally favor economic
growth and employment over tightening interest rates. They also tend to
have a more non-aggressive stance or viewpoint regarding a specific
economic event or action.


And the winner is.... It's a tie!

Well, sort of.
You'll find many a banker "on the fence", exhibiting both hawkish and
dovish tendencies. However, true colors tend to shine when extreme market
conditions occur.



Read more: http://www.babypips.com/school/the-whos-who-of-the-central-
bank.html#ixzz1Z0ccyZLH

				
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