What Moves the Forex Market?
There are a lot of factors that move the forex market and it’s important to understand what they are. Yes, there are outside factors that have little to do with technical analysis that will move the market. Here are some of those factors.
One of the aspects of the forex market is that it is so big that no one trader or financial institution can manipulate it. That’s important knowing that you can trust the economic indicators to move the market in a certain way, generally speaking.
Other markets aren’t like this. Traders often manipulate other markets, like in the stock and futures markets. You won’t encounter that investing in forex markets.
GDP
One of the biggest movers is the gross domestic product of a country. The GDP is a measure of the sellable production of any particular country. It tells you whether or not the economy is healthy.
If the GDP is on the rise, that means the economy is growing and is healthy. If the GDP falls, then it might indicate an economic recession or even depression if it is really bad.
Fiscal Policies
A government’s fiscal policies have a lot to do with the currency as well. Just look at how Greece’s spending habits forced the rest of the EU to come in and rescue them. They weren’t doing it out of the goodness of their own hearts. They were trying to save the value of the Euro.
In addition, if a government is operating in a surplus, it’s a great indication that the economy and the government is healthy. That will positively affect the currency’s value.
Inflation
Inflation is a measure of the purchasing power of a currency. For example, if 1 US dollar buys 3 candy bars today but tomorrow you can only buy 2, that means the purchasing power of the dollar has gone down. That means inflation is occurring in this instance.
Again, none of these indicators have anything to do with technical analysis, but it still moves the market. You can see how it affects them if you trade on a forex trading demo account based on the release of these economic numbers.
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