Fundamental Analysis

What influences prices in the forex market?
• Prices in the currencies market are affected by macroeconomic fa factors, such as
ctors, inflation, unemployment, and industrial production. Information on events such as
these is easy to find and are based on their analysis of economi economic data, which traders
c take positions on the market to make profit. There are three mai main macroeconomic
n factors a trader should focus on when analyzing foreign exchange rates:
• Interest Rates: Each currency has an overnight lending rate attached to which i is s
determined by that country country’s central bank. Lower interest rates usually lead to
s depreciation in the value of the country's currency.
This is largely due to traders who execute carry carry-trades. A carry carry-trade is a trade where a
currency with a low interest rate is sold and a currency with a high interest is bought.
This is based on the idea that currencies with higher interest r rates will generally rise in
ates value, and will rollover and allow trades to earn interest on a daily basis.
• Employment: The unemployment rate is a key indicator of its economic streng strength. If a
th. country has a high unemployment rate, it means its economy is no not strong enough to
t provide people with jobs, and thus, leads to a decline in the cu currency value.
rrency • Geopolitical Events: Key international political events that affect not only the for