An unexpected decrease in market interest rates will cause a: increase in the value of stocks and bonds; decline in the value of currencies; decrease in cost of borrowing. decrease in cost of borrowing. This is because an increase or decrease on these markets are typically linked to changes on other, such as bond prices having a direct correlation with stock price.
For instance, when just one country’s interest rate goes up, it pushes their currency higher against all others’ currencies (therefore also increasing its worth). However, if that same country has lower than expected inflation data then their central bank may have less need for tightening monetary policy.
In this case they would most likely cut back on stimulus measures like quantitative easing which would lead to a decrease in their interest rates. An unexpected decrease in market interest rates will cause an increase in the value of stocks and bonds, decline in the value of currencies, and a decrease cost of borrowing.
This is because changes on these markets are typically linked with other financial markets like bond prices which have direct correlation with stock price (e.g., when one country’s interest rate goes up it pushes their currency higher against all others’ currencies). If that same country has lower than expected inflation data then they may need less stimulus measures so would most likely cut back on quantitative easing leading to a decreased interest rate.
