Central Banks on radar of currency traders

Later this week, the two most important Central Banks in the world are scheduled to meet in order to decide whether to adjust their respective interest rates. The Federal Reserve Bank will be first to convene, on Tuesday, at which time it will likely raise short-term US interest rates from 4.25% to 4.5%. On Thursday, the European Central Bank (ECB) will officially announce it is holding interest rates constant at 2.25%. However, it is expected to lay the groundwork for a 25 basis point hike at its next meeting, which will take place in March. Also in the docket for this week is the official retirement of Alan Greenspan, who will step down after 18 years as Chairman of the Federal Reserve Bank. However, the change will not likely caused much of a stir in forex markets, as traders have had months to prepare. The Financial Times reports:

The Fed’s statement would leave Ben Bernanke, the incoming chairman, “wiggle room” to shape the policy debate but this could leave markets with a lingering question over how much higher rates could go.

Read More: Fed in focus for currency markets