Fundamental Factors Affecting the Forex Market
Category : Strategy
The forex market is the most volatile and liquid market. Despite the fact that the currency market is the “youngest” of all financial markets, it becomes more and more popular every year. The thing is that at fix apiforex all the basic and classical methods of analysis and forecasting of an asset work perfectly, and also technical and fundamental factors are being worked out.
Technical factors for this market are not different from those for other markets, which allows stock fix api traders to follow their analysis on this platform. As for the fundamental factors, there are obvious differences. And it’s about these differences that we’ll talk today.
Fundamental analysis for the forex market is a type of forecasting the future value of an asset based on financial data, macroeconomic indicators, as well as verbal statements of the Central Banks heads.
Fundamental data allow us to build mathematical models on the basis of statistical data of the country’s economy. For example, if data on inflation show growth, then you should expect a decrease in the currency of the country to which the data refer. Also, the actual results can be compared with the predicted ones, which will allow you to learn the current mood of other market participants.
Based on this, it is possible to identify several key types of fundamental data, the boiler determines the future movement of the asset:
- Meeting of the Central Bank. This event relates to those currency pairs, for which the Central Bank meeting will be held directly. The Central Bank regulates the money supply in the country and therefore its meetings can carry value in the form of forecasts for a number of statistical indicators, which will be discussed later. The meeting of the Central Bank solves questions about interest rate changes, as well as monetary policy in general.
- Monetary policy of the Central Bank. Monetary policy is a set of measures that the Central Bank applies to stabilize and stimulate the development of the country’seconomy. Accordingly, if the central bank tightens its monetary policy by raising the interest rate, it can be assumed that the Central Bank thus makes its currency more expensive. If, on the contrary, it softens, then it is worth believing that the value of the currency will decrease.
- Publications of statistical data on inflation. In developed countries, statistical indicators of inflation are published on a monthly basis in the context of the month, quarter, and year. This makes it clear what is the rate of inflation development and deviation from the set by the bank goal. Month by month it reflects the change in inflation from the previous month to the current one. Much more important information for the fix api trader is the annual data, as well as their deviation from the predicted indicators.
- Publication of labor market statistics. Labor market indicators are published once a month, but the most attention is attracted to Nonfarm USA (http://www.investopedia.com/terms/n/nonfarmpayroll.asp), which is published every first Friday of the new month. The market receives information about the labor market, and based on these coefficients, models are built that allow forecasting the future value of GDP (Gross Domestic Product).
- Publication of GDP statistics. Similarly, like inflation data, GDP figures are published once a month and reflect the dynamics of GDP year by year, quarter by quarter and month by month. This allows us to form a vision of the rates of economic growth and also it gives us a clear picture of the economy development or its slowdown.
- Publication of statistical data on the production volume. These indicators reflect the market sentiment for each sector of the economy and allow us to know the largest development dynamics in each section of the region’s economy.
- Verbal statements of key persons in the exchange market. In addition to data that are published on a regular basis, volatility in the fix apiforex market can also be caused directly by the statements of the heads of Central Banks or other key persons.
As we see, the main goal of studying the fundamental factors is to study the economic components that determine the current exchange rate of the currency pair and can set the future trend. The comparison of current values with market forecasts plays an important role here. Thus, it is possible to find out what reaction the majority of market participants expected and how much these expectations were met.
It should be noted that for the fundamental data analysis, new algorithmical strategies are created in the form of news robots that trade through fix api (http://forexzzz.com/product/fixapi-zzz/), which allows you to instantly obtain up-to-date market information and quotes.