Central Bank Rates

A central bank's policy rate is the anchor for everything else that currency pays. It is the single biggest driver of the interest differential between two currencies — the carry shown on the overview is simply the base currency's rate minus the quote currency's.

Why the rate matters next to sentiment. A crowded retail position in a pair with strongly negative carry is a position the crowd is paying to hold, every day, on top of being wrong about direction. Those are the positions that unwind fastest.

Current levels come from TradingEconomics; the history comes from the BIS. Six of the eight match to the decimal across both sources. Two do not, and the reason is convention rather than error:

• USD — the Federal Reserve sets a target range. The FX convention, used for the headline rate here, is the upper bound. The BIS history uses the midpoint, which is 0.125 lower.
• EUR — the ECB runs several rates. The headline here is the main refinancing rate; the BIS history uses the deposit facility rate, which currently sits 0.15 lower.

Rather than splice two different measures into one series, each chart is labelled with what it actually plots. The offset is constant, so the shape of the curve — the hiking and cutting cycles, which is what the chart is for — is unaffected.

History starts in 2000. The BIS series reaches back to 1946 for some countries, but the early segments are not always administered policy targets — Australia's 1976–1990 data is the interbank overnight cash rate, a market rate that moves daily. From 2000 onward every series here is a policy target that steps only when the bank decides.

Why Treasury yields sit on this page. A policy rate is the very short end of the curve, set by committee. Treasury yields are the market's own pricing of where rates go next, and it is the differential between countries that moves currencies. Measured against our own price history, the 2-year tracks FX slightly better than the 10-year — it is dominated by rate expectations, while longer maturities carry more growth and term premium. Yields come from FRED and are public domain.

Next meeting dates are scheduled decisions. A rate can also change between them in an emergency, though that is rare.

See also: institutional positioning for what large speculators are doing in these same currencies.