Interest rate
a.k.a. Policy rate, Base rate
The cost of borrowing money, or the reward for lending it, shown as a yearly percentage. Central bank rates move currencies.
An interest rate is the price of money. The headline rate in each country is set by its central bank, and that rate ripples into mortgages, savings and the exchange rate.
Higher rates tend to attract investors hunting for a better return, which can pull a currency up. Cuts can do the opposite. That is why traders hang on every word a central bank says.
In forex, the gap between two countries' rates also decides the overnight swap on your trade.
Thinking a rate rise always pushes a currency up. Markets often price in the move early, so the reaction can be the opposite.
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