A rate differential is simply the difference between the interest rates of the two currencies in a pair. All else equal, money tends to flow toward the currency offering the higher rate, because investors earn more for holding it — which is the basic mechanical reason interest rate decisions move currencies as much as they do.
What actually drives price action, though, is usually the expected future differential, not just today's gap — which is exactly why forward guidance and the dot plot (tools that signal where rates are heading, not just where they sit) often move currencies more than the rate decision itself.