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Quantitative Finance · Glossary

What is Central-bank reaction trade?

Definition 15.3 Strategies II: Volatility, Relative Value, Macro and the Bank Desks · Chapter 15 — FX Flow Strategies

A central-bank reaction trade positions for a central bank’s predictable response to its currency, such as intervention near levels it has defended before or reserve rebalancing after large moves, and fades or follows the move depending on the bank’s record and its capacity to act.

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