05 What Moves the FOREX Markets
So what moves the Forex Markets? Is it just random?
- Country Imports / Exports – International Trade
- Interest Rates
- Government Policy
- Big Banks
- Hedge Funds
- Speculative Traders
Foreign trade is HUGE and getting bigger every year. It is not only the mega international companies (Apple, Samsung, Toyota), but also smaller everyday mum and dad companies and even just individuals buying and selling on international websites. Generally whenever any of these transactions take place, there will be a currency conversion, from your local currency to the counter party's currency.
There are many people all over the world making transactions in the FX market all the time. 24 hours a day, 365 days a year.
But really it just comes down to basic supply and demand (like most markets).
If there are more people buying than selling that currency (for whatever reason) the higher the price will go and vice versa.
The stock market has a long-term propensity to rise in value and trend, based on economic and business growth, conversely currencies will often trade in a long term channel because of inflation and issues around monetary policy this generally prevents a currency from growing in value indefinitely.
The governments and big banks will step in to shift prices back to where they deem is good for their country's economy, unlike the stock market.
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