Factors that Affect the Forex Market

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The foreign exchange, or forex market, is the largest and most active financial market in the world with thousands of Online Trading Professional Brokers working day and night. Traders from all over the world engage in over $4 trillion worth of foreign exchange transactions. As currency prices change constantly; there are factors that affect the forex market which are accounted in detail in revews like HQBroker Online Broker Review.

Events from all over the world can have an immediate effect on exchange rates and currency values. Here are some of the important factors that commonly affect the forex market.

Political Events

Politics plays a huge role in the economic outlook for a country and the value of its currency. Traders constantly watch political news and events to measure what moves a country’s government may take in the economy.

An election heavily affects the forex markets. Currency rates would react more favorably to parties with fiscally responsible platforms and governments willing to pursue economic growth.

The fiscal and monetary policies of a government are the most essential factors in its economic decision making. Central bank decisions that affect impact interest rates are closely monitored by the forex market for any changes in key rates or outlooks.

Economy

The state of a country’s economy determines its currency value. A growing economy serves as the foundation for a stable currency. Any factors which impact the growth of the economy, either good or bad also affect currency prices.

The GDP is the baseline of a counter’s economic performance and strength. It shows the total output of goods and services produced within an economy. However, GDP is a lagging indicator, which means that it reports on events that have already occurred.

Inflation measures the increases or decreases in pricing levels over a period of time. It is also an indicator that sends a signal of increasing price levels and falling purchasing power.

Other reports such as employment levels, retail sales, manufacturing indexes, capacity utilization also bring information on the current and predicted strength of an economy and its currency.

Natural Events

Natural disasters such as floods, famine, earthquake, hurricanes, or drought in a country will have a negative impact on its currency price. Disasters will harm citizens, morale, and infrastructure. The loss of life, damage to major factories and distribution centers are all bad news for a currency.

There will be a reduction in the overall amount of funds which are being used for investments, and investments like forex don’t find many takers during these times. Government spending is also reduced due to large expenditure in relief measures. Additionally, excess funds will be diverted toward rehabilitation programs to focus on restoring the country back.

These factors will give you a better understanding about the forex market and why the prices change constantly. Money never sleeps and so does forex. Before you get into trading, make sure to consider first the factors to avoid bad trades.

Alternatively, you can get a broker to make your trades for you, or help you with your trades. Majority of brokers today offer online trading platforms that can serve you as your tool in forex trading.

 

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