Currencies are, at their core, a bet on the interest rate and growth outlook of the issuing economy. When a central bank like the Fed, ECB, or BoJ raises rates faster than its peers, capital tends to flow toward that currency in search of yield, all else being equal.
This is why FX traders watch rate decisions, dot plots, and forward guidance so closely: it is rarely the current rate that moves the market, but the surprise relative to what was already priced in. A "hawkish hold" (no hike, but hawkish language) can push a currency higher just as much as an actual hike.
Practical takeaway: before trading a major pair, know the policy stance of both central banks involved and the date of the next scheduled decision. The economic calendar on this site flags high-impact events for exactly this reason.