What Moves Currency Prices?
This video takes a look at the top 5 things that move currency prices.
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We interpret and explain price moves in real-time, 24 hours a day. Our team of analysts produce text, video and audio commentary.
You understand the markets and trade with confidence. Learn more at our website here: https://bit.ly/2HFykNd
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Now looking at this there are basically five key drivers that influence currency prices and we'll start going through them in the order of importance.
Firstly we have monetary policy, now this is by far the biggest influence of currency prices in both the short and the longer term and remember that central banks are basically in charge of saving interest rates and changing the money supply and both of these two things are critical movers for currency values.
Now when looking at monetary policy there's a couple of things that you need to focus on, such as the current rate cycle that the bank is in. For example are they currently in a hiking or a cutting cycle or are they neutral and apart from that where are the markets currently expecting the rate off to go from here?
Now also paying attention to the banks forecast and predictions will be important as their view of where the economy is going will important once we start seeing how the actual economic data either confirms or dis-confirms what the bank has been projecting.
So always be prepared for things like policy meetings of course not every meeting, will be important and market moving but if you do your research and follow up on what the markets are expecting by following us in the Forex terminal of course, you'll know which events are highly anticipated and which ones are expected to be more of a snooze fest so to speak.
Second one economic data. So the second key driver of course is all of the economic data but as we've mentioned above as well, just like monetary policy, not every single data point will be important all the time, exceptions might be when when markets aren't really expecting any fireworks from events, maybe because it's just not that important.
So expectations for events will normally determine the type of impact that we can expect from them and then of course when the actual changes significantly differs from what the consensus was expecting.
So always pay attention to tier one data points from the U.S as an important one to watch across the currency space, but again only if expectations point to a highly anticipated event. Main politics. If you talk to traders who've been trading for many years you'll often hear them say, that politics have become a more and more important topic recently. Especially for traders to be able to comprehend how prices are moving.
Of course just like with monetary policy, just like with economic data, not everything that is mentioned by a politician about an important theme like Brexit for example, will be important all the time and the market won't be selling or buying a currency every second of every day due to those political issues.
So the most significant time that these elements will be a focus for the market is when there's a fresh catalyst, a fresh news, fresh developments that the markets, that basically gives the markets reasons to price in a positive or negative repercussions from that.
Apart from things like trade wars and trade deals, also keep track of very important elections, especially in the U.S and other major economies. Different candidates can of course have various outlooks regarding business and fiscal policy and any news showing that a candidate that has for example, a good view that's expected to be good for business will of course be a positive catalyst and vice versa as well. So definitely something to always keep in mind.
Then looking at your cross-asset class correlations or intermarket analysis. Another big factor to keep in mind for currencies. This can be one of the biggest and most influential sources of short-term sentiment in the markets, so this is why we track the performance of all major asset classes throughout the trading day, including equities, commodities, bond market and of course currencies.
So overall that is the five biggest drivers for currency prices in both the short-term and the medium-term.
So there's not always gonna be a specific reason for the market to move up or down. Sometimes the market just moves and we need to be okay with that uncertainty as well but these five points should give you a very good framework of why currency prices are moving. Then you can establish why prices are moving a certain way, and why they're acting a certain way and of course how you can take advantage of those particular catalysts.
***For more detail please watch the video or go to www.forexsource.co
-----
If you find this content helpful, you’ll love Forex Source.
There’s a link below were you can learn more about it
https://bit.ly/2HFykNd
----
We interpret and explain price moves in real-time, 24 hours a day. Our team of analysts produce text, video and audio commentary.
You understand the markets and trade with confidence. Learn more at our website here: https://bit.ly/2HFykNd
-----
Now looking at this there are basically five key drivers that influence currency prices and we'll start going through them in the order of importance.
Firstly we have monetary policy, now this is by far the biggest influence of currency prices in both the short and the longer term and remember that central banks are basically in charge of saving interest rates and changing the money supply and both of these two things are critical movers for currency values.
Now when looking at monetary policy there's a couple of things that you need to focus on, such as the current rate cycle that the bank is in. For example are they currently in a hiking or a cutting cycle or are they neutral and apart from that where are the markets currently expecting the rate off to go from here?
Now also paying attention to the banks forecast and predictions will be important as their view of where the economy is going will important once we start seeing how the actual economic data either confirms or dis-confirms what the bank has been projecting.
So always be prepared for things like policy meetings of course not every meeting, will be important and market moving but if you do your research and follow up on what the markets are expecting by following us in the Forex terminal of course, you'll know which events are highly anticipated and which ones are expected to be more of a snooze fest so to speak.
Second one economic data. So the second key driver of course is all of the economic data but as we've mentioned above as well, just like monetary policy, not every single data point will be important all the time, exceptions might be when when markets aren't really expecting any fireworks from events, maybe because it's just not that important.
So expectations for events will normally determine the type of impact that we can expect from them and then of course when the actual changes significantly differs from what the consensus was expecting.
So always pay attention to tier one data points from the U.S as an important one to watch across the currency space, but again only if expectations point to a highly anticipated event. Main politics. If you talk to traders who've been trading for many years you'll often hear them say, that politics have become a more and more important topic recently. Especially for traders to be able to comprehend how prices are moving.
Of course just like with monetary policy, just like with economic data, not everything that is mentioned by a politician about an important theme like Brexit for example, will be important all the time and the market won't be selling or buying a currency every second of every day due to those political issues.
So the most significant time that these elements will be a focus for the market is when there's a fresh catalyst, a fresh news, fresh developments that the markets, that basically gives the markets reasons to price in a positive or negative repercussions from that.
Apart from things like trade wars and trade deals, also keep track of very important elections, especially in the U.S and other major economies. Different candidates can of course have various outlooks regarding business and fiscal policy and any news showing that a candidate that has for example, a good view that's expected to be good for business will of course be a positive catalyst and vice versa as well. So definitely something to always keep in mind.
Then looking at your cross-asset class correlations or intermarket analysis. Another big factor to keep in mind for currencies. This can be one of the biggest and most influential sources of short-term sentiment in the markets, so this is why we track the performance of all major asset classes throughout the trading day, including equities, commodities, bond market and of course currencies.
So overall that is the five biggest drivers for currency prices in both the short-term and the medium-term.
So there's not always gonna be a specific reason for the market to move up or down. Sometimes the market just moves and we need to be okay with that uncertainty as well but these five points should give you a very good framework of why currency prices are moving. Then you can establish why prices are moving a certain way, and why they're acting a certain way and of course how you can take advantage of those particular catalysts.
***For more detail please watch the video or go to www.forexsource.co
-----
If you find this content helpful, you’ll love Forex Source.
There’s a link below were you can learn more about it
https://bit.ly/2HFykNd
