The Underrated Influence Of International Finance Market News To Foreign Exchange Movements

In the 1970s the gold standard was abolished, and with that movement the foreign exchange market, as it is now known was initiated. As computer technology and the Internet became available to the mass of people it became possible for ordinary people to trade in this potentially lucrative market.

International trade is facilitated by the foreign exchange market and speculators have discovered an exciting market in it. Its size and liquidity mean that prices fluctuate continually and speculators exploit these fluctuate fluctuations as trade opportunities.

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.

Economic growth or decline in a country will have a bearing on currency prices but is likely to be reflected in trends rather than price jumps. For example, strong economic growth in Germany may not be reflected immediately in the Euro price because that currency is also affected by news about economic decline in other areas.

As might be expected, geo-political events such wars or natural disasters do affect currency prices but not always as expected. Many people might have expected earthquakes to have a negative effect on the price of the Yen, but in fact in rose in reaction to the news of eruptions. Though this may seem irrational it has to be remembered that the relationship between news and market reactions is not always simple.

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.

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