One subject
Central banks
8 lessons, 55 glossary terms and 29 market guides cover this across the academy. Each one links to its own page, and nothing is repeated here.
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The curriculum
8 lessons cover this.
In curriculum order, which is the order you would meet them.
- What macro means for a traderModule 08Macro and the calendar7 min
- What interest rates do to a currencyModule 08Macro and the calendar9 min
- What a central bank actually doesModule 08Macro and the calendar9 min
- Hawkish and dovish languageModule 08Macro and the calendar7 min
- The Federal ReserveModule 08Macro and the calendar13 min
- The ECB, the Bank of Japan and the People's Bank of ChinaModule 08Macro and the calendar9 min
- The CBUAE and SAMAModule 08Macro and the calendar9 min
- What a currency peg doesModule 08Macro and the calendar8 min
The glossary
55 terms belong here.
Alphabetical, each defined in one sentence on its own page.
- Adjustable pegA fixed exchange rate that the issuing authority reserves the right to reset, holding a currency inside a stated band until policy or reserves make a new central rate necessary.
- AppreciationA rise in the market value of one currency against another, produced by demand rather than by official decision, and always the exact mirror of a fall in the other.
- Bank of JapanThe Bank of Japan is Japan's central bank, responsible for monetary policy in the yen, and it is the institution whose decisions and outlook reports move every pair the yen sits in.
- Central bankA central bank sets a country's official interest rate and manages its money supply, which makes its scheduled decisions the largest single influence on that currency and its government bonds.
- Central bank interventionCentral bank intervention is the buying or selling of a currency by the monetary authority itself, undertaken to move or defend its exchange rate rather than to make money.
- Central Bank of the UAEThe Central Bank of the UAE is the monetary authority for the dirham, and because the dirham is pegged to the US dollar its policy rate tracks the dollar's rather than being set against domestic conditions.
- Consumer price index (CPI)The consumer price index measures the average change in the prices households pay for a fixed basket of goods and services, and it is the most watched inflation release.
- Core inflationCore inflation is a price index calculated with the most volatile components removed, usually food and energy, published so that a persistent trend can be read without the noise those components add.
- Currency pegA currency peg fixes one currency's rate against another currency or a basket, held there by a central bank standing ready to buy or sell its own currency at that rate.
- DeflationA sustained fall in the general price level, which raises the real value of money and of existing debt, and which central banks treat as harder to reverse than inflation.
- DepreciationA fall in one currency's value against another driven by trading rather than by an official decision, which is exactly what separates it from a devaluation.
- DevaluationAn official reduction of a currency's fixed rate by the authority that sets it, arrived at as a decision and announced, rather than produced by trading.
- Dollar indexA single number tracking the US dollar against a fixed basket of other currencies, so dollar strength can be read without choosing one pair to read it in.
- DovishDescribing a policymaker or a statement that leans toward looser monetary policy, weighting growth and employment more heavily than the risk of rising inflation.
- DurationA measure of how far a bond's price moves when its yield changes, expressed in years, rising with the time to maturity and falling as the coupon grows.
- European Central BankThe European Central Bank sets monetary policy for the euro area, taking one decision that applies to every member economy, which is the constraint that shapes how its announcements are read.
- Federal funds rateThe rate at which banks in the United States lend reserve balances to one another overnight, and the rate the Federal Reserve steers as its main instrument of monetary policy.
- Federal Open Market Committee (FOMC)The committee inside the United States Federal Reserve that sets the target range for the federal funds rate and directs the central bank's holdings of securities.
- Federal ReserveThe Federal Reserve is the central bank of the United States, and its rate setting committee takes the decision that anchors the dollar and, through it, prices in nearly every other market.
- Fiscal policyA government's use of taxation, spending and borrowing to influence demand in its own economy, decided by the finance ministry and the legislature rather than by the central bank.
- Fixed exchange rateAn exchange rate that a country's authorities hold at a stated level, or inside a stated band, against another currency or a basket, maintained by intervention rather than by the market.
- Floating exchange rateAn exchange rate left to supply and demand in the market rather than held at a level by the authorities, so it moves continuously and has no official value on any given day.
- Forward guidanceForward guidance is a central bank's published description of how policy is likely to develop, treated as a policy instrument in its own right because expectations move rates long before a decision does.
- Fundamental analysisStudy of the economic and financial facts behind a price, from interest rates and growth to company earnings and physical supply, aimed at an estimate of what an instrument is worth.
- Gross domestic product (GDP)Gross domestic product measures the total value of goods and services produced within a country over a period, the broadest single reading of whether an economy grew or shrank.
- Group of Seven (G7)The Group of Seven, or G7, is a forum of advanced economies whose finance ministers and central bank governors meet regularly and whose currencies dominate foreign exchange volume.
- Hard currencyA currency that is freely convertible, traded in deep markets and widely accepted for settlement outside its own country, which is why counterparties hold it willingly.
- HawkishDescribing a central banker, a statement or a policy stance leaning towards tighter monetary policy, meaning higher interest rates or less stimulus, usually because inflation is the greater concern.
- InflationInflation is the rate at which the general level of prices rises over time, reported as the percentage change in a basket index against the same month a year earlier, and it is the variable most central bank mandates are written around.
- Interest rateAn interest rate is the price of money over time, quoted as a percentage a year, and the rate a central bank sets for overnight lending anchors nearly every other rate denominated in that currency.
- ISM manufacturing indexThe ISM manufacturing index is a monthly survey of United States purchasing managers in which a reading above fifty says more firms reported expansion than contraction in the month just ended.
- JawboningJawboning describes officials trying to move a market with public statements alone, most often a finance ministry or central bank commenting on the level or speed of a currency's move.
- Jobless claimsJobless claims count applications for unemployment insurance in the United States, published every Thursday, which makes them the most frequent regular reading available on a labour market.
- JOLTS reportPublished monthly by the US Bureau of Labor Statistics, the JOLTS report counts job openings, hires, quits and layoffs, describing a month that the payrolls release has already covered.
- Monetary policyMonetary policy is how a central bank steers credit conditions in its economy, mainly by setting a policy rate and by operating on the size of its balance sheet.
- Non-farm payrollsNon-farm payrolls counts the jobs added or lost across the United States economy outside farming, published monthly by the Bureau of Labor Statistics and watched closely across every market.
- NowcastingNowcasting estimates the present state of an economy from data that arrives faster than the official statistic, updating the estimate mechanically as each new release lands.
- Pegged currencyA pegged currency is one whose exchange rate the issuing authority holds at a fixed level, or inside a narrow band, against another currency or a basket of them.
- People's Bank of ChinaThe People's Bank of China is China's central bank, and it manages the renminbi within a band around a daily reference rate rather than letting the currency float freely.
- PetrodollarPetrodollar names US dollar revenue earned from selling crude oil, and by extension the long standing convention under which internationally traded oil is invoiced and settled in dollars.
- Quantitative easingQuantitative easing is a central bank's purchase of government bonds with newly created reserves, used to push longer term interest rates down once its policy rate is near its floor.
- Quantitative tighteningQuantitative tightening shrinks a central bank's balance sheet, usually by letting bonds mature without reinvesting the proceeds, which drains reserves from the banking system and reverses quantitative easing.
- Rate decisionA rate decision is the scheduled announcement in which a central bank's committee sets its official policy rate, published alongside a statement that explains the vote and frames what the committee expects next.
- RecessionA recession is a broad and sustained decline in economic activity, popularly reported as two consecutive quarters of falling output but formally dated on a wider set of measures than output alone.
- Repo rateA repo rate is the interest on a repurchase agreement, which is a short term loan of cash secured against securities, and in several economies it is also the name given to the central bank's official policy rate.
- Safe haven currencyA safe haven currency is one that has tended to attract flows when risk appetite falls, the US dollar, the Swiss franc and the Japanese yen being the three most often described that way.
- Saudi Central BankThe Saudi Central Bank, known by the abbreviation SAMA, is the monetary authority of Saudi Arabia, and it holds the riyal at a fixed rate against the US dollar.
- Sovereign debtSovereign debt is borrowing by a national government, issued as bills and bonds whose yields become the reference rate against which almost everything else priced in that currency is measured.
- StagflationStagflation is the combination of stagnant growth, rising unemployment and persistent inflation at the same time, a mix that leaves a central bank with no single response that improves both problems.
- Treasury yieldA Treasury yield is the annual return implied by the price of a United States government security, and because price and yield move in opposite directions, a falling yield means a rising bond.
- Unemployment rateThe unemployment rate is the share of a country's labour force that is without work and actively looking for it, measured by a household survey and published on a fixed monthly calendar.
- US Dollar IndexThe US Dollar Index tracks the dollar against a fixed basket of six currencies in which the euro carries more than half the weight, scaled from a base period in the early nineteen seventies.
- Yield curveA yield curve plots the yields of one issuer's bonds against how long each has left to run, so its shape shows what the market charges to lend to the same borrower for longer.
- Yield curve inversionA yield curve inverts when a longer dated bond yields less than a shorter dated one from the same issuer, most often the ten year yield falling below the two year.
- Zero lower boundThe zero lower bound is the point past which a central bank cannot usefully cut its policy rate, because a depositor facing a charge can hold physical cash instead.
The market guides
29 guides answer a question about it.
Standalone reference answers, entered laterally rather than worked through.
- The forex marketMarketsWhat the currency market is, who deals in it, how a pair is quoted, and how a CFD on one settles.
- Major currency pairsMarketsWhich pairs the market treats as majors, what each is sensitive to, and how their liquidity behaves.
- Minor currency pairsMarketsHow the market uses the term minor, and where the label overlaps with crosses and exotics.
- Currency crossesMarketsWhat defines a cross, how its rate is derived from two dollar pairs, and why it can move on its own.
- What moves a currency pairMarketsThe channels that reprice a rate, why every move has two possible sources, and where that framework stops.
- The US dollar and the dollar indexMarketsWhy the dollar sits on one leg of most pairs, what the index measures, and how its basket is weighted.
- Commodity currenciesMarketsWhich currencies the market groups this way, the terms-of-trade link, and why that link is unstable.
- Safe haven currenciesMarketsWhich currencies carry the label, the mechanisms behind the flow, and the episodes where it failed.
- Asia Pacific indicesMarketsJapan 225, Hong Kong 50, China A50, Australia 200 and their peers: concentration, sessions and currency.
- What moves an indexMarketsEarnings expectations, the discount rate, the risk premium, sector mix, currency and index flows.
- How the gold market worksMarketsThe London and New York venues that set the reference price, who holds gold, and what reprices it.
- How the economic calendar worksEventsWhat sits on the calendar, who publishes each item, and how its three number columns are built.
- The FOMC and the Federal Reserve rate decisionEventsWho sits on the FOMC, what a rate decision decides, and the four documents a meeting produces.
- US CPI, the consumer price indexEventsWhat the CPI basket contains, how it is collected and weighted, and why headline and core readings differ.
- US non-farm payrolls and the employment reportEventsThe two surveys behind one report, and why the payroll count and the unemployment rate can disagree.
- US GDP and the quarterly national accountsEventsWhat the national accounts measure, why the headline is annualised, and how the three estimates differ.
- The ECB rate decision and the Governing CouncilEventsHow the Governing Council votes, why the euro area has three policy rates, and what a meeting produces.
- Euro area inflation and the harmonised indexEventsWhy the euro area needs a harmonised index, what harmonisation standardises, and how the estimates differ.
- The Bank of England decision and the MPC voteEventsHow the MPC is composed, why the named vote split is the distinguishing feature, and what the report adds.
- UK inflation and labour market dataEventsThe difference between CPI, CPIH and the retail prices index, and how the labour release is assembled.
- The Bank of Japan decision and its unscheduled release timeEventsHow the Policy Board votes, the instruments beyond a single rate, and why the release time is unscheduled.
- The People's Bank of China and China activity dataEventsHow the People's Bank of China signals policy, how the daily fixing works, and what the monthly data covers.
- The Central Bank of the UAE and the dirham pegEventsHow the dirham peg is maintained, and why a fixed rate moves rate setting to the anchor economy.
- The Saudi Central Bank and the riyalEventsThe two policy rates the Saudi Central Bank operates, and why they move on the anchor economy's calendar.
- The RBA and RBNZ decisionsEventsHow the two antipodean central banks are structured, and the rate track that only one of them publishes.
- The Bank of Canada and Swiss National Bank decisionsEventsTwo smaller central banks, one a consensus committee, the other a board with an interventionist history.
- Central bank symposia and forward guidanceEventsThe three forms guidance takes, why a promise is an instrument, and the blackout conventions around it.
- The Saudi riyal pegStructureThe shape of the riyal's fixed rate arrangement, and where pressure is priced when spot cannot move.
- Gulf currency regimes comparedStructureWhich Gulf currency runs which arrangement, and why the region's monetary union was never completed.
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