Central bank: Main Culprit behind Fundamental Analysis | Major Central Banks and Their impact on Forex

major central banks
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Major Central Banks and Their impact on Forex

There are a few major central Banks whose every decision has great impact on Forex market. These banks and their activity impacts are being described below:

The Federal Reserve System (USA)

The Federal Reserve (the Fed) is probably the most influential central bank in the world due to the influence of the US economy in the global economy. The current president of the Board of Governors is Mr. Ben Bernanke, who was appointed by President George W. Bush in January 2006, when retiring Alan Greenspan who was president of the Federal Reserve since the days of Ronald Reagan.

The Federal Reserve is an independent entity, as the decisions taken do not have to be approved by the President of the United States or by any person, whether from the executive or legislative branch of government. The Board of Governors of the Fed not receive remuneration of Congress, and its mandate lasts spanning several governments and legislatures. Once the president appoints a board member, it becomes independent, however, it can be removed by the president under certain circumstances.

Within the Fed, it is the FOMC (stands for Committee on Open Market) committee meets to decide monetary policy of the United States about 8 times a year. The Committee on Open Market Operations is an entity within the Federal Reserve, which decided among other issues if interest rates rise or fall. The goal of the Fed is to maintain sustainable economic growth and price stability in the long term, ie keep inflation at moderate levels.

The Federal Reserve kept away from political control in theory and in practice. If the goal is to keep inflation at moderate levels, it is necessary to raise interest rates since the financial speculation is encouraged and decrease in the level of employment is caused. If the Fed was not independent, the US government could intervene to maintain low interest rates, generating higher employment, which could lead to an increase in inflation. Under this argument, the Board of Governors does not consult political shift regarding the approval of increases in interest rates.

However, the Fed is subject to regulation by the US Congress, which periodically reviews the activities of the monetary institution and its officials cited public hearings. The Fed sent twice a year a report to Congress to be reviewed by both chambers.

  • Monetary Entity type: State Bank
  • Established: 1913
  • Headquarters: Washington DC, United States.
  • Web site: www.federalreserve.gov
  • Legal currency: US Dollar; ISO: USD

European Central Bank (EUROPE)

The European Central Bank (ECB) is the central bank of the single European currency, the euro, and functions as the main axis of the euro system. It is one of the most influential central banks in the world. The European Central Bank was founded in 1999 and has since adopted the euro as legal tender. The Seat of the European Central Bank is in Frankfurt, Germany.

The Euro Zone, where reigns the euro, it is composed of seventeen countries of the European Union, is so in Germany, Austria, Belgium, Cyprus, Slovakia, Slovenia, Estonia, Spain, Finland, France, Greece, Holland, Ireland, Italy, Luxembourg, Malta, Portugal and queen the euro as a common currency.

The ECB works with the “European System of Central Banks” (ESCB), which includes the 27 EU countries. However, only 17 of these countries have so far adopted the euro, constituting the “euro area” or “euro area” and their central banks, together with the European Central Bank, make up what is known of “Euro system”.

The objectives of the European Central Bank are to preserve the purchasing power of the euro, maintaining price stability and sustainable growth, however, unlike the Federal Reserve, the European Central Bank seeks to maintain inflation target below 2% . This makes controlling the money supply and monitor developments in prices.

Controlling the money supply involves, among other things, setting interest rates in the euro zone, this is perhaps the best known activity of the Bank. The members of the Euro Zone are an economy or economic bloc largely dependent on exports, so that the European Central Bank shows concerns about an overvalued euro as this phenomenon would increase the cost of goods and services exported, to the detriment of this way block the export sector.

The Council of the ECB meets twice a week, however decisions regarding monetary policy are announced in a press conference about eleven times during the year. Mario Draghi is the current president of the European Central Bank. Draghi is Italian and has studied economics and chairs the European monetary institution from the first of November 2011.

Draghi is the successor of Jean Claude Trichet, from France, who was known for being cautious, and some analysts criticized for his performance late to act against unemployment in Europe, and widespread crisis.

  • Monetary Type Entity: Banco de Organization
  • Established: 1999
  • Headquarters: Frankfurt, Germany.
  • Web site: ecb.europa.eu
  • Legal currency: Euro; ISO: EUR

Bank of England (UK)

The Bank of England is the central bank of the United Kingdom. The bank was founded in 1694 and gained independence in 1997. The Bank of England it is in the center of the UK financial system, which is headquartered in London, in Threadneedle Street.

The Bank of England belongs to the European System of Central Banks and the UK has not adopted the euro, and therefore has not given its responsibility for monetary policy to the European Central Bank.

The role of the Bank of England is to maintain price stability, low inflation, maintaining confidence in the currency and control the movement of sterling, among other issues. To achieve its objectives, the central bank has an inflation target of 2%. If prices exceed that level, the bank will look to reduce or placate inflation, while if a level below 2% is maintained, it will cause the bank to take measures to increase inflation.

The bank has the fundamental task of setting interest rates that influence spending and savings. The MPC or Monetary Policy Committee of the Bank of England is composed of nine members.

As for the issue of currency in the UK, the BoE is one of the eight entities authorized to issue legal tender. However the BoE has a monopoly on issuing currency in England and Wales, while issuing currency in Scotland and Northern Ireland is supervised and regulated by the Central Bank. Currently the president of the Bank of England is Mr. Mervyn King. The Bank is listed as one of the most effective of all the world’s central banks.

  • Monetary Type Entity: Bank of the United
  • Established: 1694
  • Headquarters: London, England.
  • Web site: www.bankofengland.co.uk
  • Legal Tender: British Pound; ISO: GBP

Bank of Japan

The Bank of Japan is the central bank of Japan. The Bank is in Nihonbashi, Tokyo. The main functions of the Bank of Japan are namely the issuance and maintenance of national banknotes, the implementation of monetary policy, provide effective and ensure the stability of the domestic financial system, ensure the financial security of the government in its operations related to the market, collect data, manage economic analysis and research activities among others.

The monetary policy committee of the Bank of Japan is comprised of the governor of the Central Bank of Japan, two deputy governors and six other members. Because Japan depends heavily on exports, the BoJ keeps interest to maintain a weak yen.

The central bank has made numerous opportunities open market operations to weaken its currency by selling market in massive quantities. The BoJ is to express their dissatisfaction when the yen is seen in the forex market. The maximum head of the bank has considerable influence on the economic policy of the Japanese government. Masaaki Shirakawa Toshihiko Fukui replaced as governor of the Bank of Japan in 2008.

Although Governor Masaaki Shirakawa has the reputation of being conservative, he has implemented new economic policies, and it seems that a new period will begin in Japan while trying to maintain the lowest in the developed world interest rates.

  • The Japanese yen is the currency used in Japan.
  • Aruhiko Kuroda is the new governor of Japan’s monetary institution.
  • Monetary Entity type: State Bank
  • Established: 1882
  • Headquarters: Tokyo, Japan.
  • Web site: boj.or.jp
  • Legal currency: Japanese Yen; ISO: JPY

Central Bank of Switzerland

The Swiss National Bank (SNB) is the central bank of Switzerland. This institution has a committee made up of three people who take decisions on interest rates. Like Japan and the euro zone, Switzerland also depends heavily on exports, which means that the SNB shows an interest in a weak currency. Therefore, their predisposition is generally to be more conservative in terms of increases in interest rates.

The aim of the mandate of the Swiss monetary institution is to ensure price stability while taking into account the economic situation. The current governor of the Central Bank of Switzerland is Thomas Jordan. Its predecessor was Jean Pierre Roth who had spent most of his career at the SNB. Roth began working at the bank in 1979; He assumed the role of chairman of the board in 2001. Roth was a member of the board of the Bank for International Settlements and served in the International Monetary Fund.

The SNB has two head offices, one in Berne and one in Zurich. It also has five representative offices in Basel, Lausanne, Lucerne, Lugano and St Gallen. Banks and financial institutions in Switzerland play a fundamental role in the economy. The Swiss franc is one of the most stable currencies in the world and the Swiss currency market and capital is notorious worldwide.

Among the most prestigious financial institutions are UBS and Credit Suisse. A characteristic feature of Swiss banks is the existence of bank secrecy protected and protected by Swiss law.

Switzerland holds the record in managing private assets. Switzerland approximately 35% of all foreign private and institutional funds are managed. Both UBS and Credit Suisse generate more than a third of its profits in this sector.

  • Monetary Entity type: State Bank
  • Established: 1907
  • Locations: Bern and Zurich
  • Web site: www.snb.ch
  • Legal currency: Swiss Franc; ISO: CHF

Bank of Canada

The Bank of Canada is the Central Bank of Canada. This financial institution was established in 1934. The Bank of Canada is the authority responsible for issuing the national currency, namely the Canadian dollar. Its headquarters is located in Ottawa.

The Central Bank of Canada has assigned as missions maintain a level of low and stable inflation, a strong and secure monetary policy, maintain financial stability and ensure the efficient management by the government in terms of available resources and public debt.

The governor of the Bank of Canada is elected by the Board of the bank itself and the respective mandate is for a period of seven years. Mark Carney is the governor of the Bank of Canada. Carney studied at Harvard and Oxford, and obtained bachelor degree, graduate and doctorate in economics. Before joining the public service, he developed a successful career at Goldman Sachs.

Mark Carney took over as the highest authority in the Bank of Canada in 2008 and is the youngest governor of a monetary institution within the countries of the G8.

  • Monetary Entity type: State Bank
  • Established: 1934
  • Headquarters: Ottawa
  • Web site: www.bankofcanada.ca
  • Legal currency: Canadian dollar; ISO: CAD

Central Bank of Australia

The Bank of Australia is the Central Bank of Australia, in English called the Reserve Bank of Australia. This financial institution was established in 1960. The monetary policy committee of the Central Bank of Australia is formed by the central bank governor, lieutenant governor, the secretary of the treasury department and six independent members appointed by the government.

Sessions monetary policy committee take place eleven times a year, usually held on the first Tuesday of each month except January. The objective of the Central Bank of Australia is to ensure stability of the national currency, maintain sustainable levels of employment and foster economic prosperity and welfare of the Australian population. The central bank has an inflation target of 2 to 3% annually.

Glenn Stevens is the governor of the Central Bank of Australia. Stevens took various positions at the central bank before becoming the current governor. Glenn Stevens studied economics at the University of Sydney and a master’s degree at the University of Ontario.

  • Monetary Entity type: State Bank
  • Established: 1960
  • Headquarters: Sydney
  • Web site: www.rba.gov.au
  • Legal tender: Australian Dollar; ISO: AUD

Bank of New Zealand

The RBNZ is the Central Bank of New Zealand, in English called Reserve Bank of New Zealand. Such monetary institution was established in 1934. The primary role of the Reserve Bank of New Zealand is to maintain price stability, low inflation, maintaining confidence in the currency, control the flow of New Zealand dollar, and set interest rates, among other issues.

To achieve its objectives, the central bank has an inflation target of 1.5%. If prices exceed that level, the bank will look to reduce or placate inflation, while if a level below 1.5% is maintained, would cause the bank to take measures appropriate to the purpose of increasing inflation.

Governor of the Central Bank of New Zealand has the executive power to take the measures the central bank practice. The central bank governor is appointed by the finance minister based on a short list that makes the central bank directory. The Governor is appointed for a term of five years and may be extended once his term ended it by a maximum of five years.

The board of the central bank of New Zealand has the responsibility to monitor the performance of the monetary institution and the performance governor of the bank, and it works to some extent as a representative of the ministry of finance, can advise the governor of the central bank in matters of varied nature.

Graeme Wheeler is the current governor of the central bank and deals with the determination of monetary policy. Its predecessor was Allan Bollard who before his appointment as governor of the Reserve Bank of New Zealand in September 2002 served as secretary of the treasury department, was president of the Trade Commission of New Zealand and director of the New Zealand Institute of Economic Research. Bollard I had great prestige, given his professorship in economics from the University of Auckland and its honorary law degree from the same university. Mr. Bollard he was known for being someone who fights inflation with extensive economic training, Bollard has condemned the bulging current account deficits and raised interest rates in New Zealand to 7.25%.

Graeme Wheeler also has a very good reputation and has served at the World Bank from 1997 to 2010 performing activities of various kinds.

  • Monetary Entity type: State Bank
  • Established: 1934
  • Headquarters: New Zealand
  • Web site: www.rbnz.govt.nz
  • Legal currency: New Zealand Dollar; ISO: NZD

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