In this video, you will learn about the major macroeconomic factors that affect the forex markets, various players in the forex markets, and how technical factors influence the forex trading.
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When the central bank of a particular country increases its interest rates. This benefits the investors who withhold that currency, as they get paid more interest now. As a result, the demand for the currency increases and the amount of money in circulation decreases, thereby reducing the supply and increasing the value of that currency relative to others. The interest rate decisions are the most important events in the calendar of a forex trader.
Every month the unemployment data of a country is published by it’s governmental agencies. If this data is better than expected, then the currency of that country gains in value compared to others. As the decrease in unemployment would mean an increase in workforce which will directly translate to increased spending and GDP growth. And this results in the strengthening of the currency.
This is a an indicator used to gauge the inflation in the economy. If the inflation is high, then it would mean that there is more money in supply than is needed. This drives the value of the currency down, then the central bank would step in to reduce this supply. In order to do this, most central banks resort to increasing the interest rates, which would again appreciate that currency relative to other currencies.
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