As it is known, a currency rate is affected by many factors.
Let's name the fundamental factors:
- state of commodity market which represents the economic life of a country or region, its supply/demand and productive forces;
- monetary policy of сentral banks which affects the size of interest rates, the cost of money, interest in foreign currencies;
- state of the labour market which indicates the rate of economic growth of the country characterizes commercial activity;
- business activity which represents production, commercial activity;
- external and geopolitical factors: known political risks, spontaneous social risks, natural hazards, and so on.
Today we will talk about the main fundamental economic factors and their impact on exchange rates.
Some of the features of the analysis of the economic indicators in the Forex market
The largest group is formed by economic ones, which can be interpreted with the help of indicators regularly published in Forex.
The list of economic indicators in Forex includes great domestic product, producer price and consumer prices indexes, unemployment rate, dynamics of housing building, business activity index, etc.
It is useful to analyze economic indicators in the exchange market for several reasons regardless of an investor’s trading type.
- Classification the indicators by their importance enables to forecast a quotation movement; a surge in the rate after a renewed indicator release can reach 200 points and more in just a few hours.
- News background has a direct influence on the rate dynamics and often contradicts technical indicators. Such a disparity can cause losses which could have been avoided.
- The understanding of economic processes allows feeling the market better.
- It should be borne in mind that traders reacting to the economic indicators release analyze the secondary information. This information has been given them by the news companies, which have got it from special agencies calculating the major indicators. The market does not always change its course after such news release but it always becomes more active.
As a rule, the indicators of those currencies are followed which form a trader’s portfolio. Almost always it includes the USA dollar, Japanese yen and the pound sterling. All the most important indicators are presented in Forex economic calendar and this considerably simplifies trader’s work. Continue reading on LiteFinance.