What moves the forex market



Have you ever wondered what moves the forex? What makes a market the size of the foreign exchange market change direction? Every new trader will spend a lot of time trying to find an answer to this question in a hope to profit from any upcoming move in the market.

Well in short anything can move the market, from:-

Inflation
Reatail sales
Interest rates
Unemployment
Corporate profits
Gross domestic product (GDP)
Faith in a country and it's Government as perceived by other countries

To list but a few but really anything that the market feels is a good barometer of how a countries overall economic heath is, can affect its currencies performance in the forex market. At some point all of the above and more will have affected the market in some way or another but the effects of one set of economic data that might be seen as important today will not be so important in six months’ time.

A great example of this would be the start of the banking crash only a few years ago. Were the markets so worried about the likes of inflation or interest rates, no! It was all about confidence or a lack of it that saw huge swings for one countries currency to another as institution and traders tried to find a safe haven for their investments. At one point in early 2009 the GBP/USD dropped around 10% in only a few weeks as the UK government was forced from one bank bailout to the next.

Ultimately it won’t just be one factor working in isolation that will move the market but a combination of factors working together.

Unlike other markets such as shares the forex is so big that it is not moved so easily or affected so much by so many small events. This makes a trend in the forex much more unlikely to change direction so quickly - a point that so many private traders have come realize and love.


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