The value of any currency is determined by the state of the economy of the country or group of countries (for example, for the Euro, these are European Union countries that accept the currency) in which it goes. The real sector of the economy – all enterprises operating in the manufacturing and services sectors bring profit to the state budget and form the real value of a currency.
Once the value of money was determined by the gold reserves of the country, today there is no direct dependence, but the greater the economic opportunities of the country, the greater its ability to maintain the value of its currency.
And these factors can not be ignored when trading on Forex. In addition, the value of the currency to a certain extent depends on the information component, since even the strongest currency can go down if society sees the prerequisites for its fall.
The entire set of real data that can affect the value of a currency is a factor of fundamental analysis. What are the most important among them?
- Actually economic factors, including the balance of payments deficit, CPI, inflation, unemployment, and so on.
- Political factors. Election of the president or parliament, political instability in the country, the expected change of power – all this destabilizes the situation in the economic sphere, and therefore often does not benefit the national currency, while long-term stability, on the contrary, is the key to increasing its value.
- Informational messages. The media can both raise panic in the market or exclude it. Naturally, panic sentiments among traders and among the population do not play for the benefit of any currency, and therefore lead to an increase in its value.
- The cost of raw materials and other products. If a country’s economy depends on a certain commodity, for example, the Russian economy largely depends on oil (and even if it is not so now, then it is perceived by everyone), then the cost of raw materials or products on the international market will influence the rate. / li>
Thus, for fundamental analysis, which must be used in trading on any currency pair, it is important to take into account as many factors as possible and, first of all, pay attention to the most important ones for a particular currency!