Factors Affecting Currency Rates

If you learn to determine what affects the exchange rate, then you can assume that you have practically achieved success in forex trading.

After all, it is this aspect that is the basis of trading on the currency exchange, it is enough just to know after what event the price will go up, and what news will cause the growth of the exchange rate.

The main thing is to correctly determine the weight of the event and its degree of influence on the trend.

Factors affecting the exchange rate are nothing more than the appearance in the press of messages about changes in the economic or financial situation, which to one degree or another related to a particular currency.

In other words, these are fundamental factors that are closely related to a particular currency and put pressure on its price.

In this article, I will not load you with complicated calculations for conducting fundamental analysis of the economic situation in the country, the issuer of the monetary unit. We will talk about specific factors that can be used to make money on Forex. Types of news and the power of their influence on exchange rates

First of all, all events should be divided into two groups – planned and unexpected.

1. Planned news is those about the exit, which can be found out in advance using the economic calendar.

These include – statements by the heads of central banks, a publication of financial statements, and index indicators. Usually, even before the news itself is released, the market is already responding to the upcoming report, and you can make good money by only waiting.

Trading on such news is more planned and straightforward, it is advisable to use only the most significant events for trading. In the economic calendar, they go under three bulls.

At the same time, it is not necessary to understand by economic factors influencing the exchange rate only news, the news is only a display of information, but in fact, it’s getting deeper.

For example, the price of a national currency is affected by:

  • Inflation rate
  • Payment balance
  • The amount of gold, foreign exchange reserves
  • Unemployment rate
  • Economic growth indicator
  • Money supply
  • The discount rate of the National Bank
  • The stable economic and political situation

And here is a change in all of these indicators is reflected in the media, after which the price of the currency reacts to them.

2. Unexpected news – reports of disasters and terrorist attacks, bankruptcies, and weather disasters, as well as other news about the appearance of which is not known in advance.

Track their appearance using a news indicator or subscribing to a news feed. The first option is more preferable, as it allows not only to respond faster to the signal but also makes it possible to enable the currency filter.

Typically, the appearance of such news causes a sharp and short jump or a drop in prices. Using these signals to trade Forex, you can earn quite a lot, but trading itself is quite risky.

You must independently distinguish the main factors that affect the exchange rate, evaluate their significance, and filter out false signals. To do this, compare the history of the exchange rate and the main events for the same time.

When using the factors of fundamental analysis as a source of Forex signals, one should not forget that not every news can cause a price change. In practice, it often happens that the currency does not respond to even the most reliable report.

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