Everyone would almost agree that FOREX is a global marketplace. Sellers and buyers are converging from all parts of the world and taking part in trades amounting to trillions of dollars a DAY! Given that FOREX trading becomes globalized activity and almost everyone is into it, it shows that macroeconomics event now has an even bigger role in foreign exchange than before.
As we push through on this article, we will be talking about few of the economic trends as well as events that’ll benefit those who’re new in the market. If you are serious to give this a shot, then see to it that you’ve given the time to understand the movement in this market.
Macroeconomics and FOREX
The market is mainly driven by the overarching factors of macroeconomics. These said factors are influencing the decision of a trader and ultimately, it determines the overall value of a given currency at any given period in time. A country’s economic health is a critical aspect in its currency value. The overall economic health however is then shaped by various events and information that might change on day to day basis, which later contributes to round the clock nature of international FOREX market.
How is FOREX Impacted by Capital Markets?
Perhaps, global capital markets are the most obvious FOREX indicators used in economy’s health. Meanwhile, bond and stock markets are more noticeable in the world. It’s quite hard to miss the release of public info in capital markets given that there’s constant media coverage and information on dealings of institutions, government entities as well as corporations.
Bond markets are critical too. It has a say as well on what’s happening in FOREX market for both currencies and fixed-income securities heavily rely on interest rates. Fluctuations of treasury price are factored in to the movements of currencies.
In other words, if there’s a change in yields, then it will affect the currency values directly. With this in mind, it is vital to have better understanding on how bonds, most especially governments are valued to be able to excel and succeed as a trader in foreign exchange.
FOREX and International Trade
The balance of trends and trade levels between nations are also a key aspect to be taken into account. Trade levels between nations do serve as proxy for relative demand of goods from nations. Nations with services or goods that command high demand in the international market are likely to have appreciation of currency.