Important Factors Effecting Markets
Fundamental analysis is very important and based on the performance and growth of economies around the world.
Important Factors Effecting Markets
Fundamental analysis is very important and based on the performance and growth of economies around the world. Major economic and financial news is released daily to the markets, outlining the monthly/weekly performances of various aspects of the country’s economy.
Fundamental analysis can be seen as one of the vital reasons of market movement; a simple assumption in the Forex market can be seen as ‘if a country’s economy is doing well, therefore, the currency of the country will also do well and vice versa.
The world’s largest economy which contributes to a large proportion of global growth is the U.S. The markets look to economic and financial data released from the U.S. for speculation on the stability of the largest economy and its contribution to current global growth expectations. Other economies that are regarded as key players of economic data releases are Japan, UK, Australia, New Zealand, Switzerland and Europe. Investors can see that in Forex, these economies make up the major currencies that have high liquidity – USD, EUR, GBP, CHF, JPY, AUD and NZD. The recent rapid growth and strengthening of the Chinese economy has now labeled China as the second largest economy in the world. However, the Chinese currency, Yuan cannot be found to be traded by retail brokers, yet this rapidly expanding economy data releases are subject to market speculation on other economies in the world such as Australia, New Zealand etc.
Central Banks and Interest Rates Effecting Markets.
Every country has a central reserve bank that controls the inflow and outflow of money within their economy. The control of the financial system is the basis of each Central Bank’s monetary policies that support consumers, corporations, governments and international environment’s income and spending. Each Central Bank has policy makers and a president/governor that are all influential to policy decisions. One important monetary policy tightening is each country’s interest rate; each month the interest rate decision is made by the Central Bank based on a voting system from members/policy makers. The markets provide different speculation on falling and rising interest rates. A rate rise, also known as hike, can be seen as a positive or hawkish move for the economy by the government, as interest rate rises can be a move further to economic growth; and vice versa for interest rate cuts can cause a negative or dovish move in the eyes of the market.
The markets are always influenced whenever a president of a Central Bank makes a statement or speech on current affairs in the economy. The market can be at its most volatile during such hawkish or dovish speeches and statements.
Here is a list of the major Central Reserve Banks and their governors
U.S. Federal Reserve Bank – Chair Janet Yellen
European Central Bank – President Mario Draghi
Bank of England – Governor Mark Carney
Reserve Bank of Australia – Governor Glenn Stevens
Bank of Canada – Governor Stephen S. Poloz
Reserve Bank of New Zealand – Governor Graeme Wheeler
Bank of Japan – Governor Haruhiko Kuroda
Some Important Economic Indicators
In order to understand whether an economy is performing well, the financial markets look to key indicators and announcements that come out every day. As there are lots of economic news data releases daily, we have put here some of key economic indicators you should look out for when trading and investing.