that countrys currency. There are a great number of economic theories which surround fundamental Forex analysis, attempting to put various pieces of economic data in context, to make it comparable. This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Central banks create money, that money is then borrowed by private banks. Also, technical forex traders might avoid known risk events like major economic data releases since one of the key assumptions of technical analysis: Price Discounts All tends to break down during the period immediately after the announcement as the new information is assimilated into the. If an economy is forecast to hold strong, it will appear as an attractive place for foreign investment, because it is more likely to produce higher returns in the financial markets. The converse side of the inflation coin is deflation. This is because interest rates are a great leveller of the economy. A list of key economic factors that are routinely covered in the current news and which can move the market when they are released includes the following: Interest Rates: a key element in evaluating one currency against another. Major Economic Indicators, economic data may hint towards shifts in the economic situation of a respective country. Employment Data: If a country has an increasing percentage of its citizens employed that will tend to strengthen its currency. How and why does this happen?
That has everything to do with the strength of an economy. The percentage or the principle that private banks pay central banks for borrowing currencies is called a base or a nominal interest rate. Manipulating interest rates - a big part of the national monetary or fiscal policy - is one of the primary functions of central banks.
An increase in rates would tend to make the currency appreciate. A growing economy tends to strengthen a currency. This key data typically comes in the form of jobless claims, payrolls statistics or the unemployment rate for a country. You can track such announcements and developments through our. These indicators are found in news reports and news outlets. They do so since the release of such key information can often result in considerable short term volatility in the currency market, as well as prompt shifts in market sentiment.
Inflation, news releases on inflation report on the fluctuations in the cost of goods over a period of time. Note that every economy has a level of what it considers 'healthy inflation'. The most influential factors could be enlisted as follows: Government policies: especially in terms of interest rates and sovereign debt sales to foreigners. From a Forex fundamental analysis standpoint, the best place to start looking for trading opportunities is in the changing interest rates. To avoid this, central banks can also increase interest rates, thus cutting borrowing rates and leaving less money for banks, businesses and individuals to play around with.