The forces behind every currency move
Discover how interest rates, inflation, politics, and global events make currencies rise and fall.
Forces Behind Every Currency Move
Anika continues to use her trading app to learn more about currencies.
Every morning before work, she checks exchange rates — and they’re never the same twice.
“Even when I’m asleep, prices change,” she notes. “There must be something driving it.”
She’s right. Behind every tiny tick in the Forex market are real-world forces: economic data, central bank policies, and global events.
These are all shaping what money is worth.
Economic Indicators: The Market’s Pulse
One morning, Anika reads that Germany’s GDP has contracted, surprising investors.
By lunchtime, she notices that the euro (EUR) is slumping against other currencies on her app.
Germany’s the biggest economy in the eurozone and often called “the engine of Europe”. Disappointing data is impacting the whole currency union.
Anika realizes: “So, economic news really moves the market!”
That’s because traders treat economic indicators like a performance review for a country or a region.
Key Economic Indicators in Forex
Economic indicators guide central bank and government policies, and hint at currency trends.
Key ones include:
Central Banks in the Driver’s Seat
Nothing sways currencies quite like interest rates, and central banks set the benchmarks.
When rates rise, investors chase better returns, pouring money into that country. To invest, they need the local currency. The currency strengthens.
When rates fall, the opposite happens: capital flows out, weakening the currency.
In short:
That’s why informed traders mark every central bank meeting and speech on their calendars — these events move markets.
Central Bankers: Holding onto Every Word
Central banks do more than set rates: they shape expectations. A single phrase can spark moves because traders search for clues about what’s next.
This signaling is called forward guidance. It helps investors anticipate policy shifts, making central bank communication a powerful tool.
One afternoon, Anika is watching a Bank of England press briefing. The governor hints at rate hikes, and the pound jumps.
“Wow, just one sentence moved the market!”
She learns: “Traders watch people, not just charts.”