Every currency in the Forex market is influenced by a number of domestic macroeconomic indicators of their country, as well as the impact of the global market in General. Economic indicators (GDP growth, indicators of export-import trade), social factors (unemployment rate, the state of the property market) and the state policy of the Central Bank, each of these parameters determines the value of a certain currency on the foreign exchange market. Each of the 6 major currencies has its particularities, and in this article we will discuss the main factors that affect each currency separately.
United States dollar (USD) is the most commonly traded currency in the Forex market. It is also used as a measure of the cost of other currencies and commodities. USD dominates foreign reserves among all countries in the world – in the currency persists for approximately 64% of the world reserves. In a broad sense, the U.S. dollar is affected by several fundamental factors. As the prices of the vast majority of the metals and grades of oil are set in USD, significant changes in supply / demand on these markets are immediately reflected on the value of the currency. That is what happened in 2008, when, largely because of the collapse in oil prices, the quotations of the pair EUR/USD reached the level of 1.60. As the dollar has secured the status of "safe haven" in which to "come" investors in the case of the troubled economic situation. Due to the fact that the currency sometimes acts as a backup, sometimes USD can be the best problem in the United States. As for internal factors, a huge impact on the currency has Federal reserve system and its basic interest rate. Their decisions on the input rates, the fed officials will be based on inflation, employment and GDP, therefore, these factors also affect the value of the dollar. Other important factors for the USD are the trade balance and the level of public debt of the United States. As a rule, the growth of the trade deficit and public debt reduce the attractiveness of the American currency. The converse is also true judgment, when high rates of trade deficit and debt may be perceived by investors as indications of the reliability of the dollar.
Now, the Euro (EUR) is the newest currency traded in the currency markets, which is the national currency of 17 member countries of the European Union. The fundamental factors driving the Euro, as a rule, the strongest economies using the new common currency – France, Italy and most importantly Germany. The main components of the EUR quotes are the level of consumer price inflation and the target credit rate set by the European Central Bank. A strong influence on the common currency and provide indicators of the export trade of these countries and the level of unemployment given the fact that countries such as Germany are major exporters of manufactured goods and technology. Europe still dependent on Russian energy (gas) and the Middle East (oil), and high demand for these products has a negative impact on the performance of the European currency. Another problem for the Euro is a different level of economic development that has exposed the debt crisis of 2011. In turbulent times, the EU leaders hard to find solutions that would be equally beneficial for both key economies and for the less powerful countries. Before the crisis public debt EUR was considered as an alternative reserve currency to USD. Unfortunately, the problems with economies of the peripheral countries of the EU has undermined the credibility of the Euro.
Pound sterling (GBP) is the national currency of the United Kingdom, and the key factors responsible for its welfare such as ambiguous and diverse as the British economy and the extent of its influence on the global economy. London is still considered the financial capital of the world, and its commodity market plays a key role in indicators GBP. The strongest influence on the pound has the level of inflation and GDP, but the performance of the real estate market is also important for the British currency. Not so long ago the British economy regularly showed signs of weakness, reducing the level of attractiveness of its GDP. Despite this, sometimes traders use the pound as an alternative to the Euro when the European Union becomes too serious. Quotes GBP is also influenced by political events, including elections. As a rule, the indicators of the currency react negatively to any uncertainty, as the parliamentary elections in 2010, which was the reason for the lack of a majority in Parliament.
Japanese yen (JPY) is the strongest and most commonly traded currency in the Asian market. Japan's economy is concentrated, by and large, around industrial exports. Merchants appreciate the JPY as a safe currency in a period of dominance in the markets negative sentiment towards risk, but it is widely used and short-term speculators during the period of increased risk appetite. Low Japanese interest rates allow such traders to borrow foreign currency for investment in other currencies at higher interest rates. Sometimes quotes the yen strongly influenced by the close proximity and tense relationship of Japan with China. The constant devaluation and Central Bank intervention Japan are major challenges for the JPY. The Bank of Japan is concerned that the excessive revaluation of the yen (now the Japanese currency is very profitable due to economic instability) can hurt export-oriented economy, and therefore tries to weaken the Japanese currency. In the early 1990s, Japan faced deflation after the 1980s, the bursting of the price bubble in the property market, and it remains the biggest threat to the future of this country. The government is difficult to cope with the deflation given the increase in the elderly population relative to young and growing worries about the future of this country. Among the European Alps, hiding little Switzerland, which, however, is a strong player in the international market, attracting an incredible amount of money. Did the Swiss franc (CHF) is a major currency traded on Forex. CHF is another currency that is favoured by traders in the period of negative sentiments towards the risk, because Switzerland is famous for its stable economy and vast foreign exchange reserves (despite its small size, Switzerland is ranked 7th in the world in terms of state reserves), which adds reliability and trust to this currency. Like the JPY, CHF also suffers from the constant Central Bank intervention. State Bank of Switzerland went so far that on 6 September 2011 recorded figures CHF on the same level with EUR, creating a constant pressure on its currency.
Canadian dollar (CAD) is considered a "commodity currency" as Canada's economy depends entirely on exports. A large part of canadian exports goes to the United States, making the economy and currency of this country is dependent on the economy of its southern neighbor. Main export is oil, so the CAD quotes also depend on the situation on the oil market. Global economic growth and the growth of quotations of the relevant raw materials makes CAD an attractive tool for investors. On the other hand, quotes CAD may suffer from problems in the global and national economies.
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