Hi all,
Question about how the pricing of currencies works. What I want to understand is who is deciding and how that the EUR/USD (for example) should be at or around 1.1365 today? What fundamental economic indicators are being used to calculate that price? Who is to say that perhaps it shouldn’t be higher or lower based on certain fundamentals? How is this calculated?
Thank you!
The price of something is based on supply and demand my friend. If the price of EURUSD is 1.1365, it is because this is the price where buyers and sellers are agreeing upon at that exact moment in time.
The markets are made up of many of different people and institutions, so you will not find any specific reason why the price is what it is. Price is the reflection of all market participitants, and their millions of opinions, all baked into the market at that point in time reflected as supply and demand.
Hi krugman25,
Thank you for the reply, appreciated 
Digging deeper please, I am wondering then how does Warren Buffett calculate the value of a stock to determine if it is under/over-valued? Can’t the same be done with forex? I know for example some of the big banks will publish papers on the value of the EUR/USD and say that it is under/over-valued … how do they do that? How is it calculated?
Thanks again
Warren Buffett was a student of Benjamin Graham, so his fundamental valuations were based on Graham’s theories of valuation. All of that being said, that is Buffett’s own opinion. The market price of anything is the collective opinions of all traders at any given time and its effect on supply and demand. The total sum of market participants includes Buffet.
Those big bank papers you mentioned are also just opinion pieces.
I’ll leave you with this gem from Buffett which basically sums up everything I have said.
Warren Buffett -"Price Is What You Pay, Value Is What You Get”