Definition: The gap between the benchmark policy interest rates set by two respective central banks.
Comprehensive Institutional Breakdown
Capital globally flows toward higher-yielding currencies with stable macroeconomic fundamentals (the 'Carry Trade'). Long-term macro currency trends are driven fundamentally by interest rate divergence between the Federal Reserve, ECB, BOJ, and BOE.
Cross-Market & Execution Note
Forms the macro interest rate baseline that dictates global bond yields and cost of corporate debt.