The Top 5 Fundamental Currency DriversThe goal of this article is to understand what really moves the markets.
1. Central Bank Decisions
These organizations manage the countries monetary system and policy.
They control the countries money supply and operate through specific mandates.
Stable inflation is a common mandate applicable to the majority of central banks.
Interest rates are a crucial tool used by them to reach their mandates.
Changes in interest rates have a tremendous impact on the Forex markets.
Rate decisions from central banks can cause lots of volatility.
They’re also great opportunities for making money.
For this reason, interest rates should be something all Forex traders monitor.
Good to start here as a beginner in fundamentals.
2. Economic News Releases
News releases like:
GDP Gross Domestic Product
CPI Consumer Price Index
Employment Data like average earnings, NFP, and unemployment Rate
could have a huge impact on interest rate decisions and traders always have expectations on these releases if it differs from it market reacts.
3. Geopolitical Events
Politicians are an important part of the market moves.
Investors seek stable economies, also tax decisions and fiscal policy decisions are drivers of the market.
4. Natural Disasters
Things like earthquakes or tsunamis can negatively affect a country’s economy.
5. Intermarket Movements
Equities Bonds and Commodities are all connected to each other so one spike in an asset class could lead to moves in the other asset classes too.
Things like risk aversion and risk appetite are a daily play on the markets because the risk is a great factor of daily currency moves.
Safe haven bids are bonds Japanese yen and Swiss franc in a market crash these assets have money inflows.
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