Economic Activities and Forex Market

Beginner Questions
1

How is it possible for a country’s economic Activities, example: increase/decrease in employment, payment of wages, festival, business/economic summit, large events, etc, affects the forex market?

2

These events influence the market because professional traders or otherwise known as market makers closely watch news events and buy or sell according to the impact of each news event. For example. Under the current economic climate if news is considered to be positive for the whole world people are willing invest in riskier investments. Eg. AUD, EUR, GBP, CAD, NZD and sell safe haven currencies. Mostly USD at the moment but sometimes CHF and JPY. If news is considered bad for the whole world it would be risk off and sell AUD, EUR, GBP, CAD and buy USD. If news is specific to only one country the impact should only effect Pairs with that currency. This applies to all types of news. Some events will have big impact and some small impact.

3 Likes
3

Hi,
This is all included in the Education section of the School of Pipsology - in the kindergarten classes or pre-school. Just find that Education section and read it for 90% of all you will need to know to be successful in Forex

2 Likes
4

Good post. This is the biggest factor in forex trading - global risk. This affects every currency and to a large degree. Its not just like some local unemployment issue or a commodity price change due to supply/demand of someone else’s factories.

I would add that the Dow and the Nasdaq are good indicators of global risk attitudes - if risk is seen as low, they rise, if risk is seen as high they fall. But it isn’t always just a matter of moving into safe havens - sometimes global risk is seen as so important that it just isn’t worth the individual trader to be long any currencies. Any model that develops targets for buying/selling currencies should also incorporate a circuit breaker which just puts you in cash.

5 Likes
5

Thanks tommor. Your explanation is not bad either

6

Thank you BAD14214.

1 Like
7

Beautifully explained. A good read.

8

As any economic activity determines the demand of a particular currency, it affects the value of currency. As a result, it impacts the forex market.