- The monetary policy is situated by Central Bank-Government-Nations realize that manipulating currencies does not work
- A benchmark interest rate is set via market operations.
- The difference between yields paid across currencies in part governs the appeal of each.
Rising prices wear down growth-it builds an illusion of faster growth
Falling prices are not good for an economy-it’s difficult to prevent loss of confidence
Concept of real interest rates (Nominal interest rate minus rate of inflation)
Gross domestic products measure a country’s production.
Depending on their risk appetite some investors seek rapid growth.
It keeps currency demand floating.
Countries that grow strongest tend to have a firmer currency
It identifies a lot about export and import demand
Rising employment is a sign of economic health
Utilization accounts for 70% of US economy
Wages are a key sign of growth trend
Other factors affecting the price fluctuation
Central bank bias
Visit the official websites of central banks and read the notes of recent meetings
These policy meetings directly address these issues and give out key metrics and hints as to what the next move might be
You will hear individual bank members deliver speeches supporting these views
Currency markets tend to trade numerous moves ahead and reward currencies supported by increasing rates.
Goods in – goods out generates a trade balance
Too high imports creates an exodus of capital, which is bad for a currency
To high imports can create domestic demand constraints and encourage inflation
Investors punish nations with too high deficit since that currency needs to become less attractive to allow exports to compete
Deficits habitually do not last forever