The biggest market maker that moves the currency market is the central bank, but what is a central bank?
The central bank is a public institution that manages the currency of a country or group of countries and controls the money supply, literally, the amount of money in circulation. The main objective of many central banks is price stability. In some countries, central banks are also required by law to act in support of full employment.
One of the main tools of any central bank is setting interest rates, the “cost of money”, as part of its monetary policy. The central bank is not a commercial bank. An individual cannot open an account in a central bank or ask for a loan and, as a public body, it is not motivated by profit.
Central bank statements and minutes
From the directives of the central banks, large investors take their trading decisions. Besides, who may have the power if not the one who decides whether or not to cut or raise interest rates? Who builds money creation programs? Who adopts policies to extend or narrow the value of the individual economies and, consequently, the weight of their currencies?
Their decisions can drastically move the foundations of an economy and, above all, can influence the development in the following months. Accordingly, we can take advantage of these situations exactly as the big investors do (the investment banks).
It is important to read the Statement and Minute released by a central bank at the end of the meeting to be updated on its monetary policy.
Below you can find the main central banks with links to all these important reports.
European Central Bank
The European Central Bank (ECB) is one of the world's most important central banks and serves as one of seven institutions of the European Union. The bank's capital stock is owned by all 27 central banks of each EU member state. Headquartered in Frankfurt, Germany, the bank formerly occupied the Eurotower prior to the construction of its new seat. The main Bank's task is to maintain price stability in the euro area and so preserve the purchasing power of the single currency.
The ECB’s Monetary Policy decisions are published in a press release at 13:45 CET on the day of the Governing Council monetary policy meeting. Immediately after the meeting, the President and the Vice President of the ECB explain the decision at the Press Conference and Answer Questions from journalists. The press conference can be watched live at 14:30 CET and on demand shortly after.
Bank of England
The Bank of England is the central bank of the United Kingdom and the model on which most modern central banks have been based. Established in 1694 to act as the English Government's banker, and still one of the bankers for the Government of the United Kingdom, it is the world's eighth-oldest bank. Its mission is to promote the good of the people of the United Kingdom by maintaining monetary and financial stability. That includes things like making sure people can pay for things securely, keeping the cost of living stable, and ensuring people can rely on banking or payment services.
The Bank of England publishes the Monetary Policy Committee's decision with the Minutes of the meetings at 12 noon on Thursday of that week. The quarterly Monetary Policy Reports set out the economic analysis and inflation projections that the Monetary Policy Committee uses to make its interest rate decisions. At the end of the page of each Monetary Policy Report you can watch or read the transcript of the press conference.
Swiss National Bank
The Swiss National Bank conducts the country's monetary policy as an independent central bank. It is obliged by the Constitution and by statute to act in accordance with the interests of the country as a whole. Its primary goal is to ensure price stability while taking due account of economic developments. In so doing, it creates an appropriate environment for economic growth.
The SNB conducts an in-depth Monetary Policy Assessment in March, June, September and December. Each of these assessments results in a monetary policy decision and the publication of a medium-term conditional inflation forecast. The SNB sets out the reasons for its decisions in a press release and in a quarterly monetary policy report published in the Quarterly Bulletin.
Bank of Canada
The Bank of Canada is responsible for formulating Canada's monetary policy, and for the promotion of a safe and sound financial system within Canada. The Bank of Canada is the sole issuing authority of Canadian banknotes, provides banking services and money management for the government, and loans money to Canadian financial institutions.
The Bank carries out Monetary Policy by influencing short-term interest rates. It does this by adjusting the target for the overnight rate on eight fixed dates each year. The quarterly Monetary Policy Report of the Bank of Canada’s Governing Council presents the Bank’s base-case projection for inflation and growth in the Canadian economy and its assessment of risks. On the page of each Monetary Policy Report, on the right-hand side, there is a link to the Press Conference.
The Federal Reserve System was created on December 23, 1913, and it is composed of several layers. It is governed by the presidentially appointed Federal Reserve Board of Governors. Twelve regional Federal Reserve Banks, located in cities throughout the nation, regulate and oversee privately owned commercial banks. The Federal Open Market Committee (FOMC) sets monetary policy.
The Federal Reserve System performs five general functions to promote the effective operation of the U.S. economy and, more generally, the public interest. The Federal Reserve
The FOMC holds eight regularly scheduled meetings during the year and other meetings as needed. Links to Policy Statements, Projection Materials, Press Conference, and Minutes are in the Calendars. The minutes of regularly scheduled meetings are released three weeks after the date of the policy decision.
Bank of Japan
The Bank of Japan, as the central bank of Japan, decides and implements monetary policy with the aim of maintaining price stability. Price stability is important because it provides the foundation for the nation's economic activity. In implementing monetary policy, the Bank influences the formation of interest rates for the purpose of currency and monetary control, by means of its operational instruments, such as money market operations.
The Bank of Japan holds eight regularly scheduled meetings during the year and other meetings as needed. Links to Policy Statements, Outlook Report (The Bank's View), Summary of Opinions, and Minutes are in the Calendars.
Reserve Bank of Australia
The Reserve Bank of Australia is Australia's central bank and also provides certain banking services as required to the Australian Government and its agencies and many overseas central banks and official institutions. Additionally, it manages Australia's gold and foreign exchange reserves. The RBA has two boards: the Reserve Bank Board, which has responsibility for monetary policy and financial stability, and the Bank's policy on other matters excluding payments system policy; and the Payments System Board, which has responsibility for matters relating to payments system policy. The Bank is managed by the Governor.
The Reserve Bank Board is responsible for formulating Monetary Policy. The Reserve Bank sets the target "cash rate", which is the market interest rate on overnight funds. The Statement on Monetary Policy sets out the Bank's assessment of current economic conditions, both domestic and international, along with the outlook for Australian inflation and output growth. The Statement is issued four times a year. Minutes of the Monetary Policy meetings of the Reserve Bank Board are published two weeks after each meeting.
Reserve Bank of New Zealand
The Reserve Bank of New Zealand is New Zealand's central bank. It was established on 1 August 1934 by the Reserve Bank of New Zealand Act 1933, and it issued its first banknotes in 1934. Although not a government department, RBNZ has been wholly owned by the government of New Zealand since 1936.
New Zealand’s monetary policy framework is conventional by current international standards. RBNZ uses monetary policy to maintain price stability, support the maximum sustainable level of employment and keep inflation between 1 and 3 percent on average over the medium term. Reserve Bank of New Zealand implements monetary policy by setting the Official Cash Rate (OCR), which is reviewed seven times a year. The Reserve Bank publishes its Monetary Policy Statement (MPS) quarterly.