Interest Rates The most important factor that moves the FOREX is interest rates. The FOREX interest rate for a country is based on that country's central bank interest rate, the rate at which the central banking institutions there lend money short-term to commercial banks. The central bank can move interest rates up or down, which determines which currencies at a given time are high-yield or low-yield. Interest rates also help determine how much money a trader gets from his broker. The currencies you buy via FOREX are not delivered to you personally, therefore brokers pay traders interest based on how much difference there is between the short, high-yield currency interest rates and the long, low-yield currency interest rates.
The Fed The United States has a huge influence in FOREX, much more so than other countries. The central banking system of the U.S. is the Federal Reserve System, often referred to simply as the Fed. Many countries peg their currencies to the U.S. dollar, including the Netherlands Antilles, United Arab Emirates, Jordan, Barbados, Lebanon, Belize, Oman, Saudi Arabia and the Bahamas. The Fed has also sometimes directly intervened in the foreign exchange market, both to signal the view that the U.S. did not agree with the exchange rate and to slow down rapid exchange moves.
Trade The amount of a country's gross domestic product and its balance of payments can affect the FOREX market as well. The gross domestic product serves are a general indicator of a country's economic health. The balance of payments, released monthly in the United States, shows the value of imports compared to the balance of exports. Exporting more than you import is also considered a sign of a healthy economy, and means that more money is flowing into a country than out of it.
Mergers and Acquisitions Mergers and acquisitions, both domestic and international, can affect the FOREX market. International mergers allows traders to follow the path of currency from one country to another. If a large company in China buys out a company in Japan, it would have to buy the currency to do so in the FOREX. These kinds of changes are very time-sensitive and may have strong effects, but only temporarily.
Politics Politics are one of the biggest influences on the FOREX. Politics can even surpass basic economics in determining the rate of foreign currency. Rates will fluctuate in countries where armed conflicts, scandals and elections are happening, usually pushing rates down until stable political climates return. Politics may also lead to the government of a country changing, creating or implementing different financial policies, which may also move the FOREX market.
Nice post! One thing though that really caught my attention is the politics. I am just new to trading in approximately 4 months but I never though that politics will affect currency that much before entering forex. I guess that's why the news is always a key part to be considered before opening up a trade. Truly the politics and conflicts between leaders of one nation will create a big impact om its economy and of coarse when we talk about economy, forex will be next to it.
good and informative article. it shows to me that trader is not the only one that make the market move. many aspect that make the market move or exchange rate become increase and decrease. maybe the aspect that make the market move more than five like mentioned in article above. this fact also explain me that forex is not zero sum game.
Awesome post. Very informative post. Politics influences a lot of Forex trading. In the politics part of your post you got the right point. Thank you very much for sharing this good article. I have learned something from your article. So, please keep posting so that we can gather knowledge about Forex trading.
This is why I want to join with this forum. I want to get many informative and helpful article for my business research. Excuse me, I copied this article to be based on my article about the fundamental analysis for market in forex. I also use it for my students.
Good post. Yes there are many factors that have an effect on the currency prices. There fore a good trader cannot sit idle and needs to be up to date with whats happening around him. To exploit the Forex market in a positive way a trader should keep himself up to date with the latest economic developments, Political influences and country's economic outlook.
that make the market move actually is trader it self. retail traders and big players. but psychology behind the traders decision that make the market move could be many. but mostly related with fundamental economy, political decision and maybe natural and unnatural disaster.
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