Economic, political and military changes influence forex trading. In order to succeed in forex trading, it is better for forex traders to know these factors that can do great help in analyzing the market trend before they trade for real. The following are some economic factors that influence forex trading greatly.
Factor No.1: GDP
GDP, short for Gross domestic product, refers to the total amount of all of the goods and services produced in a country during a specific period. GDP is a main indicator of how healthy a country’s economy is. Usually, it is composed of four parts: business spending, government spending, private consumption and total net exports. GDP is a main economic factor that influences forex trading.
Factor No.2: interest rate
Interest rate is another economic factor that influences forex trading. If interest rates are increased in a country, it will enable the country’s currency to appreciate in value. So interest rate is a key economic factor in influencing forex trading.
Factor No.3: employment rate
Employment rate measures the percentage of people employed in a country. A higher employment rate means that a greater proportion of population is employed, which in general will have positive effects on the GDP per capita. Employment rate indicates the productivity of a country and is greatly related to gloom or boom of forex trading
Factor No.4: foreign trade
In a country, if import exceeds export, the currency of this country tends to decline and if export is bigger than import, the currency has the tendency to appreciate. Declining and appreciation of a currency has a great impact on forex trading.
Factor No.5: macroeconomic control
Forex traders should pay close attention to macroeconomic control of a country in forex trading. Macroeconomic control influences value of currency greatly, thus it has profound influences on forex trading.
Factor No.6: inflation
Inflation refers to rise in the general level of prices of goods and services in an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services. For example, people could buy 10 steamed buns with 1 dollar in 2011 but in 2012, they can only get 5 steamed buns with 1 dollar. Inflation impacts on the value of a country’s currency, which is closely pertinent to forex trading.
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