3 Global Factors that Affects any Forex Trading Price Movements

When you hear the word foreign exchange, a stock market-like environment comes to mind. However, currency exchange is done not just by Forex traders! When you take a trip abroad and choose to spend on some of the local products, you have to pay your currency for their product - which is equivalent to trading currencies, hence making it a foreign exchange. These currency prices don't always remain the same. 

 

Several global factors have a repetitive influence of them, and affect the price of various Forex pairs, which ultimately contributes to making Forex an incredibly volatile market! 

 

 Common Factors that Affects Forex Trading

 

Here are 3 factors that affect Forex prices the most:
 

1) Interest Rate: Borrowing money in the form of loans and similar elements is common today. Be it for education, housing, or any field that needs big funds, loans are the best option. Each country has a different interest rate, i.e. the rate for borrowing funds. This amount is fixed by the country's central bank. The rates have to be monitored regularly because if the interest drops too low, everyone will start borrowing in heaps! Supply and demand laws have to be obeyed at all costs to prevent economic disruption. 

 

When either supply or demand goes up while the other remains stagnant, there will be a financial catastrophe. These rates are one of the primary causes for price hikes and drops in Forex.
 

2) Inflation: Like with interest, when a country's supply and demand ratio isn't in balance, inflation or deflation is observed. Goods and services offered by a country see a drop in demand when their prices hike up. This creates a void in exports because the country can't bring in products, due to the dying demand ratio. When this export-import ratio sees imbalance, one of two things can happen; lesser exports will lead to the country having to borrow money from other nations. When an import increase but there is a lack of demand, the same happens again! 

 

With such movements, a country's currency gets devalued. While devising a strong Forex trading strategy, these factors have to be kept in mind.
 

3) National Politics: The government has a huge role to play in Forex. With thousands of industries under its control, political conditions can have adverse effects on the currency markets. Changing governments, civil wars, or any riots can lead to a rapid fall in currencies. A country's currency is directly tied to its economy. With poor political conditions rises a poor economy. Lack of resources can lead to poor exports on the outside, and a dropping demand rate on the inside. 

 

This will ultimately cause the currency value to plummet, leaving the country in an inept state.
 

Foreign exchange is an incredibly vast field, with the room for success huge! The tricky parts however rise, when these above mentioned factors start influencing the markets and creating troubling waves of volatility. With the aid of an adept broker, you can start trading currencies like a pro, and leave home successful! Call WesternFX today and avail our world-class brokerage. With our proven Forex trading strategies, you will dominate Forex trading in Thailand!