How various economic indicators affect the exchange rate
Currencies react quite sensitively to changes in the economic indicators of the issuer’s country; sometimes, after the publication of news, a currency pair moves several dozen points in a matter of minutes.
Therefore, it is so important to know what may follow a change in the discount rate or increased unemployment; there are not so many main indicators that really affect the exchange rate.
When conducting fundamental market analysis, the main thing is to know the relationship between their change and the currency’s reaction to this change
In addition, take into account the quality in which the analyzed monetary unit is included in the currency pair.
• Trade deficit - an increase causes a depreciation of the national currency, and a decrease causes its strengthening.
• Balance of payments deficit - the currency reacts as in the previous case.
• Inflation indices - their growth clearly indicates a depreciation of the currency, which means the exchange rate will decline.
• Rising prices for government bonds - a positive phenomenon, which means the exchange rate of the currency will increase.
• Stock index price - is directly dependent on the exchange rate.
• Unemployment - in this case, there is already an inverse relationship; with a decrease in the unemployment rate, the national currency only strengthens.
• Money supply - or in other words, the amount of money in circulation, the more there is, the cheaper it is, that is, an increase in the money supply leads to a decrease in the price of currency.
• Retail sales - have always been a positive factor; an increase leads to a strengthening of the monetary unit.
• Interest rates - their growth causes an increase in exchange rates, since most often it leads to a shortage of money.
• Productivity in the economy - has a positive impact on the value of national currencies.
Using various fundamental factors As guidelines for real trading on the stock exchange, we should not forget that not all of them have the same impact on the trend. The degree of influence, as well as find out when a particular indicator is expected to be published, can be found in economic calendar.