Factors affecting the price of major trading instruments

Forex market is extremely volatile and various economic news are acting as the prime price driving catalyst. By knowing about these economic events, traders will able to understand the situation and can decide what is better for them. Some of the crucial aspects are discussed here.

The Political Prospects

When the government of the country will concentrate on improving the lifestyle of citizens, the economic condition of the country will be better. If the country is politically stable, this is the right place for investments as it indicates that there is a high chance of raising financial conditions. The investor will buy the currency of a country in which the political scenario is good.

Low Inflation Rate 

If the country’s inflation rate is low, then the buyer will buy the currency of this country. Because its currency is anticipated to admire in price contrast to the currency of the country which has a high inflation rate.

When the inflation rate is high and the central bank cannot control it, investors decide to take a step to manage this. So, the bank increases the interest rate. This is a good indication for you because you can make more profits as the value will be increased.

The ratio of Export and Import Values

This ratio is related to the terms of trade. If the terms of trade are high, the currency will be always in demand as the country have more exports than imports. On the contrary, if the terms of trade are low, this will be in low demand because the country has more imports than exports. Normally, the Forex trader will show interest to invest in a country in which currency has a high demand. Click for more info and enhance your fundamental knowledge by reading free content at Saxo. This will help you to understand the impact of major news on different assets.

Government Higher Debt

If the country is in higher debt, this will fail to attract foreign deposits. As a result, the country’s exchange rate is also decreased. When you will see this, you will think twice to buy the currency of that country. So, observe the circumstances.

Speculation

This is not a countable attribute. If the traders guess that the currency price will be increased, then the investor will ask for more currency. As a result, the value will be increased more. When you are in this position, you have to manage the crusade effects and try to get out of the situation before it goes. 

The Security Market

Traders get a general idea about the financial condition by observing the trend of the market. When the market shows an uptrend that means the currency price will increase. On the other hand, if the market shows a downtrend that means the price will decrease. Traders will show their interest in the high currency rate.

Unemployment Rate

When the country has a high employment rate, this indicates that the country is economically growing. On the other hand, the country which has a high unemployment rate that means is not growing economically with the flow of time. The high unemployment rate can influence the price of currency badly. So, the traders will not invest money in that country.

Financial Strategy

The country makes a plan to attract foreign capital. If the government takes steps for increasing economic growth, investors can create a high value of the currency by increasing the demand.

There are many basic and technical strategies of the Forex market. But this is not enough for you to execute a trade properly. The traders have to know about the particular factors which influence the price movement of the market. This will help them to choose which trade is beneficial to them, decide what to do in a particular situation. So, contemplate the global economic factors.