When America abandoned the gold standard in the 1970s the ancient foreign exchange market was re-born. Currencies began to float freely against each other. As time went by the burgeoning online community began to see huge opportunities to trade currencies for profit.
There are those who trade foreign exchange as a way of conducting international trade, and there are others who trade as speculators, aiming to profit from the constant state of flux. The size, and therefore the liquidity, ensure constant movement. The directions of those movements are determined by many factors.
Prices tend to revolve around pivot points but these points and the rate of change vary as news floods in from north, east, west and south. Various types of news influence the movements which may react violently or mildly. Trading strategies and decisions will often hinge upon the news that floods in from all corners of the world.
Interest rate changes are big drivers of currency prices. If a country increases its interest rate it currency is likely to rise, and if the rate falls so too might the value of the currency. Central bankers create this news regularly as meetings take place and decisions are made with regard to the rates of interest to be charged by central banks. Before definitive announcements are made by bankers commentators and speculators will create their own grey news regarding the likelihood of rate changes, one way or another.
Sharp price jumps may be precipitated by news items but trends are established by the ebb and flow of news over longer time spans. The profligacy of some governments which elect to borrow money in order to prop up social programmes and so run their countries into huge debt may take years to play out and the effect on a currency will be gradual.
Geo-politics is a source of many news items that influence currency fluctuations. The profligate social spending of some European countries has led them to near bankruptcy affecting the value of the Euro despite the strong performance of other countries within the Euro zone.
International trade is the primary reason for the existence of the foreign exchange market. Speculators are peripheral. In a small country like South Africa the sale of shares in a large company to foreigners can strengthen the national currency as foreigners buy it to pay for their shareholdings. As is well known, the weak Chinese currency has allowed that country to become the workshop of the world in recent years as it may export its manufactured goods to other countries at favourable prices. Trading currencies is an intellectually stimulating occupation because it means keep ahead of the game in many ways.
There are those who trade foreign exchange as a way of conducting international trade, and there are others who trade as speculators, aiming to profit from the constant state of flux. The size, and therefore the liquidity, ensure constant movement. The directions of those movements are determined by many factors.
Prices tend to revolve around pivot points but these points and the rate of change vary as news floods in from north, east, west and south. Various types of news influence the movements which may react violently or mildly. Trading strategies and decisions will often hinge upon the news that floods in from all corners of the world.
Interest rate changes are big drivers of currency prices. If a country increases its interest rate it currency is likely to rise, and if the rate falls so too might the value of the currency. Central bankers create this news regularly as meetings take place and decisions are made with regard to the rates of interest to be charged by central banks. Before definitive announcements are made by bankers commentators and speculators will create their own grey news regarding the likelihood of rate changes, one way or another.
Sharp price jumps may be precipitated by news items but trends are established by the ebb and flow of news over longer time spans. The profligacy of some governments which elect to borrow money in order to prop up social programmes and so run their countries into huge debt may take years to play out and the effect on a currency will be gradual.
Geo-politics is a source of many news items that influence currency fluctuations. The profligate social spending of some European countries has led them to near bankruptcy affecting the value of the Euro despite the strong performance of other countries within the Euro zone.
International trade is the primary reason for the existence of the foreign exchange market. Speculators are peripheral. In a small country like South Africa the sale of shares in a large company to foreigners can strengthen the national currency as foreigners buy it to pay for their shareholdings. As is well known, the weak Chinese currency has allowed that country to become the workshop of the world in recent years as it may export its manufactured goods to other countries at favourable prices. Trading currencies is an intellectually stimulating occupation because it means keep ahead of the game in many ways.
About the Author:
It can be very tempting to compare currency news sites from one another particularly their claims. Countless traders perform forex analysis several times during trading hours, just to be really sure.
No comments:
Post a Comment