Factors that Affect the Forex Market
There are several factors which influence forex prices; anything that affects the flow of money in a
country or between countries may impact currency values.
Economic and financial factors have critical impact on currencies movements. Economic data are kept under strict secrecy up to the time of the actual occurrence. Central banks, for example, change the discount rate confidentially and even though the markets closely watch these events, sometimes the outcomes do not coincide with the predictions. The deciding factor in whether a fundamental release will have an effect on the currency market is how closely the actual results come to economists’ predictions. If the fundamental release matches predictions then it should have already been “priced in” to the market beforehand. However, if the release strays from the anticipated numbers, then it will have a bigger impact on the market.
Economic and financial factors have critical impact on currencies movements. Economic data are kept under strict secrecy up to the time of the actual occurrence. Central banks, for example, change the discount rate confidentially and even though the markets closely watch these events, sometimes the outcomes do not coincide with the predictions. The deciding factor in whether a fundamental release will have an effect on the currency market is how closely the actual results come to economists’ predictions. If the fundamental release matches predictions then it should have already been “priced in” to the market beforehand. However, if the release strays from the anticipated numbers, then it will have a bigger impact on the market.
Economic Data
The dates and times of economic data release are well known and are anticipated by the market.
There are many resources available on the Internet concerning financial and economic indicators.
CMS provides an Economic Calendar for the dates of critical fundamental announcements and
events
Natural Factors
Natural disasters like floods, famine or drought in a country will have negative impact on its
currency value. The distribution of money within the country’s boundaries is restricted severely
under adverse circumstances like these.
The general public is more cautious in spending and there is likely to be a dramatic reduction in the overall amount of funds. Government spending is also reduced because of huge expenditure in relief measures.
The general public is more cautious in spending and there is likely to be a dramatic reduction in the overall amount of funds. Government spending is also reduced because of huge expenditure in relief measures.
Political Factors
Politics greatly determine the direction of the country’s economy. Political unrest causes
uncertainty and subdues both economic growth and currency value. An upcoming election or war
may give rise to a cautious investment approach, reducing the currency value of a country.