How exchange rates drive monetary policy

- By FX Markets Staff
- @FXMarkets_
- 25 Jul 2005

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Central bank policy and interest rates have returned as the main drivers behind exchange rates. The 'measured' pace of the Fed has opened up a significant interest rate differential that kicked in to provide a strong underpinning for the dollar. In contrast, rate cut speculation left the euro on the defensive at one stage, while revised perceptions that the UK interest rate cycle could turn down more quickly has led to a mauling for sterling. The New Zealand dollar has also been affected by

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