All the global trades or deals in financial markets are made with the world's primary currency, $ (Dollar), but who decided this?
In 1973 Petrodollar Agreement was made, a deal between Superpower USA and OPEC. Since the dollar is the chief currency for natural oil and gas trading.
When a bank borrows dollars from the other bank, it must pay interest. So, if the interest rate is high, banks will take fewer loans or borrow fewer dollars.
All financial markets operate on loans, and they take loans to make more money, pay back their loans with interest and keep the profit.
When the interest rates are high than their expectation or possible return on investment, they will take fewer loans, and hence there will be far fewer activities or trades happening in the markets.
Since we're talking about how financial markets work, We will not discuss how beneficial this can be for a country's economy, like attracting investors.
How to Check for changes in Interest rate
The Federal Open Market Committee decides the interest rate on the dollar (FOMC), which holds eight meetings every year,
Simply logging into CME FedWatch Tool, everyone can see when the next meeting is happening.
We can watch the FOMC Press Conference live on the official Youtube Channel of the Federal Reserve. To get an idea of the market's direction, what factors contribute to the decisions made?
Market updates are readily available everywhere.
CNN Markets, U.S Dollar Index Chart, S&P 500 E-Mini Futures, BTCUSD Charts.
This was a very brief idea, of course. How financial markets work can help you with the direction to look into, but only part of the way.
