Excerpt from: Understanding Spread Betting
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| September 19, 2007 | | Formulating spread betting strategy | One of the more important things to many financial markets is interest rate news. Yesterday's Fed rate cut is reverberating through global markets, affecting what is happening on a global scale. When formulating spread betting strategy, it can be helpful to consider how something like the Fed rate cut could affect other markets.
Rate cuts generally favour stocks, as it lowers the cost of borrowing and doing business, boosting profits and share values.
The Fed rate cut is also affecting the spot forex market. The dollar is weakening because the drastic nature of the cut indicates that the U.S. economy is slowing, and the cut is meant to jump-start it. Additionally, the carry trade is being brought back because a Fed rate cut increases risk appetite, boosting higher-yielding currencies.
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