Forex trading is one of the most exciting forms of investing in the world for two major reasons. First off, currency is literally the most liquid commodity in the world. As a result, the market is incredibly volatile; leading to quite a bit of profitable opportunities. Also, in the world of currency trading, investors have the ability to make money no matter which direction the market is heading. Keeping that in mind, one of the big questions on the minds of currency traders is, “Which way will the US dollar go?” After all, the USD is the world’s largest currency, and as a result, it’s also the most often traded. There are several factors that play a role in the movement of the USD. Today, we’ll talk about these factors as well as what we’re likely to see throughout the rest of the year 2015.
Factors That Affect Growth In The USD
As with any other currency, movement in the United States Dollar is heavily dependent on the economy it represents. In this case, the United States economy is represented. So, when trading the USD, it’s important to take economic factors in the United States into account. Currently, one of the most important factors is monetary policy.
In the depths of the financial crisis of 2008 and 2009, the United States Federal Reserve reduced its interest rate to an all time low of 0.25%; where it has been since. As a result, consumers spent less money on their loans, which led to higher consumer spending figures. Also, businesses spent less money on loans; leading to more business growth and more jobs available in the United States. Soon, the US economy was back in bullish territory; leading to growth in the United States Dollar.
However, it’s important to point out that the low interest rate was not put in place to last forever. In fact, when the United States economy was able to stand on its own, the low interest rate would be increased. Here we are 6 years later, and it seems as though that’s finally going to happen. Throughout the year 2015, the United States Federal Reserve has been adamant about the fact that they plan to raise interest rates by the end of the year.
What Will Happen When The Federal Reserve Increases Interest Rates
Considering why the interest rate was decreased, and the affect it has had on the United States economy, it’s not hard to determine what will happen when the interest rate is raised. When interest rates are raised, consumers and businesses alike will have to spend more money on interest; ultimately leaving less money available for the growth of the US economy. As a result, we can expect that the value of the United States dollar will fall. However, in the world of forex, this doesn’t mean that there will be no profits to be had. As a matter of fact, traders have the ability to make money no matter which direction a currency is heading. This opens a big opportunity for forex traders as we move into the second half of 2015.
Where The Opportunity Is Available
Throughout the year, the United States Federal Reserve has said that they would be increasing interest rates by the end of the year. Experts are expecting this to happen in September. When interest rates are increased, we know that the value of the United States dollar is likely to decline. So, by watching the situation closely, traders will have the ability to take advantage of the declines in the US dollar caused by interest rate hikes!
What Do You Think
Do you think the Federal Reserve will increase interest rates by the end of the year 2015? Let us know your opinion in the comments below!
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