Important news events that influence the Forex market
Over the years, many have wondered what actual news events influence the Foreign Exchange market. The truth is that there are so many news items out in the world, and sometimes it can get hard to keep track of them all.
However, we at Commodity Brokers Ltd. want to make it our duty to inform you of some of the most influential and essential news items and how they affect global trade and currencies.
The Foreign Exchange Market is one of the most profitable and volatile markets globally. It can be difficult for investors to keep up with what events impact the market and cause-specific prices to move.
These are five of the most significant news events concerning currency rates:
Central bank interest rates
Central banks around the globe set interest rates, and these decisions influence currencies. Higher interest rates attract foreign investors looking for a safe place to save money, which increases demand for a specific currency and causes an appreciation in its value against other currencies. In contrast, low-interest rates do just the opposite.
For example, suppose central banks increase the interest rate. In that case, this may affect yields on U.S assets such as bonds or notes, which results in increased demand forU.S assets and causes the dollar to increase in value against other currencies such as the Japanese Yen.
GDP (Gross Domestic Product) growth figures
The growth of a country’s Gross Domestic Product (GDP) is an essential indicator of how well its economy is doing and can influence currency valuation. If a country has a healthy, growing GDP can make its currency more attractive to foreign investors who will buy the currency and cause an appreciation in its value against another.
For example, suppose China reports more substantial than expected quarterly figures. It may result in increased demand for Chinese Assets, which increases the demand for the Yuan versus other world currencies such as the U.S Dollar or Euro.
Unemployment data/employment figures
Figures on Unemployment are released quarterly by the U.S Department of Labor, and they can affect currency valuation due to increased or decreased demand for that country’s currency. Suppose figures released show a decline in unemployment rates. In that case, foreign investors may look to purchase that country’s currency as it may suggest continuing economic growth, increasing demand for that currency, causing an appreciation in its value against other currencies such as the Japanese Yen.
The opposite is true if unemployment rates surge after a series of positive reports suggesting a healthy economy; this would cause foreign investment to sell off those assets and move into other safer emerging market currencies such as those from Australia. It would cause those currencies to appreciate versus the Japanese Yen and the USD.
Inflation rates can affect both country-specific currencies and the U.S dollar itself due to its status as a global reserve currency. Inflation is when prices go up across the board, or there is too much money in circulation which dilutes the value of an individual’s cash holdings. If a country reports increased inflation, this may result in a demand for that countries currency against other world currencies such as the Japanese yen.
However, if a country reports decreased inflation, this may result in increased demand for that countries assets and increase their currency against those of other nationalities.
The stability of government within each nation can affect currency valuation based on how stable or polarizing their policies are. Political stability ensures investors that the nation is in good hands, resulting in increased international investment and demand for its assets which will increase the valuation of its currency versus other currencies.
If a country is experiencing internal conflict, this may negatively affect demand for that country’s asset, resulting in decreased value of its currency versus other world currencies.