Currently, Forex is a global marketplace, with buyers and sellers around the world, investing trillions of dollars every day. The foreign exchange trading has become such a lucrative activity that macroeconomics events plan an even more significant role in forex than ever before. Also, forex graph macroeconomics show a considerable rise in the number of investments and traders across the globe.
Below, we will focus on some economic trends and events that will benefit those who are new to the Forex Market, and we will help you become a successful forex trader.
The Role of Macroeconomics
The macroeconomic factors play a significant role in the forex market. They influence the trader’s decisions and to some extent determine the value of a currency at any given point in time. Considering that economic health of a nation’s economy is a crucial factor in the amount of its currency, the overall financial health is influenced by various events and information that are susceptible to change on a daily basis.
Capital markets
The global capital markets represent the economy’s health and are one of the most important indicators, whether the economy is good or not. On the other hand, stocks and bond markets are the most noticeable markets in the world. So, in this case, it quite challenging to miss the release of public information in capital markets, considering there is a steady flow of media information.
All corporations, institutions, and government entities are covered by media outlets.
International trade
Another crucial factor is the balance of trade levels and trends between countries. It serves as a representative for the relative demand of goods from a state. A nation which has a high demand for products and services, typically have a stable currency.
For example, to buy goods from Japan, a buyer must convert their currency into Japanese Yen. This will increase the demand for the Yen and put pressure on its value.
Political impact
The politics have the power to shape all aspects of economy and forex trading isn’t an exception. This is one of the reasons why forex traders follow political news and events. They can include various measures, for instance, increasing government spending to tightening restrictions to a particular sector.
For example, the upcoming elections are always a significant event for currency markets, and the exchange rate will still be in favor of parties with fiscally responsible platforms and governments who want to achieve economic growth. We have the Brexit vote, which had a massive impact on the British pound.
Economic releases
Economic reports are a foundation of the forex market. That’s why keeping a financial report calendar is crucial to stay up to date. One of the most important economic reports is GDP, and it’s a baseline for a country’s economy. It measures the total output of goods and services produced within the marketplace. However, you should know that GDP is a lagging indicator, which means it reports on events and economic trends that already happened.
Inflation is another thing you should consider because it indicates an increase in price and falling purchasing power. But, the inflation can be a double-edged sword, and many view it as placing downward pressure on currency because of limited purchasing power.
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