There are a wide range of factors that affect the price of a currency pair, and it is impossible to calculate every change caused. However, there are some key events that all Forex traders should pay attention to, and these events may have an intermittent impact on the entire economy. Here are some of the key events that have an impact on the prices of forex pairs.
Elections and political events
Elections have a significant impact on the country’s currency. Some parties may be seen as more conservative and fiscally responsible, while others are more democratic and spendable. In general, elections are accompanied by an increase in market volatility.
When it comes to forex trading, macroeconomic data is one of the most reliable information. This is because it is considered the most important data when it comes to the strength of the economy; that is, how strong the currency is. You can find this data using the economic diary. Common macroeconomic factors include:
Interest rates – For another country, interest rates are one of the most important criteria in determining the exchange rate. A higher interest rate often leads to a currency appreciation.
Inflation Rates – Two of the most closely watched indicators for measuring inflation, the Consumer Price Index (CPI), a weighted average of consumer basket prices, and the Producer Price Index (PPI), are the average price changes that reach local producers about the size of their production. Low inflation may force central banks to lower the country’s interest rates, ultimately weakening the currency.
Employment rates – News about a country’s employment rate often determines how strong the country’s economy is. Mostly, a higher employment rate means a stronger currency. In the United States of America, the Employment Outside The Agricultural Sector (NFP) report , a report on the country’s official employment data, is released on the first Friday of each month.
Traders’ sentiment polls – Surveys are a rough measure of market expectations. For example, the Consumer Confidence Index is a closely watched indicator for determining future retail spending intentions. Most developed countries export pmis on a cyclical basis. The PMI is closely monitored to determine future business spending intentions.
GDP – GDP is the overall growth of the country’s economy, usually followed by forex traders. Housing reports, employment figures and inflation rates also play an important role in determining a country’s GDP.
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