1. The gap between two rates
An exchange rate is the price of one currency in another, so what matters is not one bank's rate but the gap between two: the interest rate differential. If the Fed pays more than the ECB, holding dollars earns more than holding euros, and over time that pulls money toward the dollar. Right now the widest gap among the major dollar pairs is USD/CHF: 4.00 percentage points in favour of USD. Every pair's gap is on central bank rates today.
2. What is expected is already in the price
Traders do not wait for the decision to price it. Weeks before, the expected path of rates is already in the exchange rate, and the consensus of economists is rarely wrong about the rate itself: 1036 of the 1112 decisions with a consensus since 2008 matched it exactly. So on the day, a currency moves on what was not expected: a different rate, a change in the statement, new projections, a vote split, or what the chair says at the press conference. That is what hawkish and dovish describe.
3. What price did on the day
This site measures every decision of the eight major banks since January 2025 on one-minute candles, the same way each time. Across 105 of them, the median spike in the first 15 minutes was 21 pips, against a median range of 14 pips in the hour before. In 67 (64%) the first spike closed back inside that hour-before range within 60 minutes, and in 42 of those price then took the other side within four hours.
The same counts split by what the bank did. "Stronger" is the bank's own currency one hour after the announcement, whichever side of the pair it is on:
| Decision | Measured | Currency stronger after 1 h | Weaker | Median move after 1 h |
|---|---|---|---|---|
| Hike | 14 | 5 | 9 | −8.3 pips |
| Cut | 26 | 14 | 12 | +5.5 pips |
| Hold | 65 | 35 | 30 | +1.4 pips |
A hike "should" lift the currency. After the 14 hikes here it was weaker an hour later in 9, and after the 26 cuts stronger in 14. The few real surprises behaved as the textbook says: 1 hawkish surprise, with the currency stronger an hour later in 1, and 2 dovish, weaker in 2. Small samples, stated as they are.
4. Why a currency can fall on a rate hike
- It was priced. The currency rose for weeks on the expectation; on the day, those who bought it take profit.
- The guidance. A hike that comes with a hint it may be the last lowers the expected path, and the path is what the price holds.
- The orders. Before a release, stops build just above and below the range of the hour before. The first spike often runs one side of them; once it closes back inside, the move usually belongs to the other side.
5. Which pairs move most
The median of the bigger 15-minute spike on each bank's decisions since January 2025:
| Central bank | Pair | Decisions | Median spike | Closed back |
|---|---|---|---|---|
| Reserve Bank of New Zealand | NZD/USD | 13 | 30 pips | 4/13 |
| Bank of England | GBP/USD | 14 | 29 pips | 8/14 |
| Bank of Japan | USD/JPY | 14 | 28 pips | 11/14 |
| Federal Reserve | EUR/USD | 14 | 26 pips | 10/14 |
| Reserve Bank of Australia | AUD/USD | 14 | 20 pips | 8/14 |
| Swiss National Bank | USD/CHF | 7 | 17 pips | 4/7 |
| European Central Bank | EUR/USD | 14 | 15 pips | 10/14 |
| Bank of Canada | USD/CAD | 15 | 12 pips | 12/15 |
One-minute bid candles from Dukascopy. Counts include the decisions where the first spike did not close back. They describe what happened, not what will.
Questions
Do higher interest rates strengthen a currency?
Over months, a currency whose rates rise relative to others tends to strengthen, because holding it pays more. On the day, it depends on the surprise: 1036 of 1112 decisions since 2008 with a consensus matched it, and an expected hike is already in the price.
Why did the currency fall after a rate hike?
Usually because the hike was expected and the market had bought the currency before it, or because the bank signalled it might be the last. Among the 14 hikes measured here since January 2025, the bank's currency was weaker one hour later in 9.
What is an interest rate differential?
The gap between two currencies' policy rates. Of the major dollar pairs, USD/CHF has the widest right now: 4.00 percentage points. The live table is on central bank rates today.
What is a carry trade?
Borrowing in a low-rate currency to hold a high-rate one, earning the differential. It works while exchange rates are calm; when markets turn fearful the trades are unwound together, and the low-rate currencies (the yen, the franc) often jump.
Which currency pairs react most to interest rate decisions?
Measured on the first 15 minutes since January 2025, the median spike was largest for NZD/USD on the RBNZ (30 pips), GBP/USD on the BoE (29 pips), USD/JPY on the BoJ (28 pips).