Forex Market Movers

One of the first things any investor will learn when beginning in the forex market is that this particular market doesn’t necessarily follow the normal trends. In forex trading, geopolitical and macroeconomic events are the two most powerful forces affecting movement. Events that would normally influence a particular segment within a market wouldn’t even touch forex because the market is so enormous. Unless an entire national economy is affected, nothing much would influence forex except fluctuations in interest rates within an economy.

Interest Rates Promote Immediate Movement
Historically, when central banks raise or lower interest rates within a given national economy, the currency within that country is proportionately affected. For example, if the interest rates are up there will be a greater demand for the currency of that country. Conversely, if the interest rates are lowered then the corresponding currency will be proportionately devalued. This is the one of the first things to learn about forex market movers. Watch the interest rates and compare them between two currencies you are pairing. As you see movement in currencies throughout the day it is most often the result of interest rates rising and falling as opposed to other factors such as imports and exports which take much, much longer to affect the forex market.

Long Term Effects of Imports and Exports
Forex market movers are factors which affect the demand for global currencies. While it is true that imports and exports affect the valuation of any one nation’s or region’s currency, it takes considerably longer to make an impact than fluctuating interest rates do. When using imports and exports as a model for forex market movers, simply look at what each country in your pair is doing at any given moment. For instance, if Great Britain is exporting more than France and France is importing much less, then you might believe that the Great British pound (GBP) has risen in value against the currency of France. Unfortunately, there is more to the story than that! Forex market movers need to take into consideration the currency for the region. Since 2002 the official currency of France has been the Euro which is also the official currency for 11 other countries. In light of this, you would need to consider what the Euro is doing as opposed to weighing British imports and exports against those of France.

Global Politics as Forex Market Movers
The one example which is predominantly cited when trying to explain the effects of global politics in the forex market is what happened at the beginning of the US invasion of Iraq in 2003. In the very beginning it was expected that the United States would have controlling interest in the region’s wealth (oil!) and as a result the valuation of the dollar rose dramatically. It was felt that the war would end quite quickly and the US would gain all that wealth. As the war dragged on and it became clear that this was not to be the case, the value of the US dollar began leveling off once again. However, bear in mind that it takes extreme global political events to significantly alter a national or regional currency to any great extent.

Forex market movers then are not what you are used to watching for in other markets. Forex is an entity all to itself as it simply weighs the value of one currency against another in order to match them up in a buy/sell pair. There is however one more factor in all of this that has been known to affect the forex market and that is the value of gold! When gold is up a currency is down and vice versa. Although this, in itself, isn’t actually a market mover it is an indicator of the relative value of that country’s currency and something to watch for when trading in the forex market.

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