Key Macroeconomic Indicators for Currency Trading

A list of some of the most important economic indicators when trading Forex currencies:

1. Interest Rates

• US: US interest rate decisions are made by FED 8 times per year

• ECB: The European Central Bank meets monthly to decide about its interest rates policy (Between the 10th and the 14th day of each month)

2. Gross Domestic Product

• US: US Advance GDP is released 1 month after the end of the quarter by the Bureau of Economic Analysis (BEA). The final GDP is released 3 months after the quarter’s end. GDP is released during the last week of each month.

•  Europe: Monthly by Eurostat

Factors Affecting Exchange Rates

Similar to any other financial price, the price of an exchange rate is determined by the forces of demand and supply. The price of an exchange rate reflects many economic and non-economic factors. The most important factors are interest rates, inflation, growth, employment, and political risk.

Here are all the major factors affecting the fluctuations of global currencies.

1. Interest Rates

Central Banks and Interest Rates

The interest rates of an economy are adjusted by the domestic monetary authority, such as the FED in the US and the ECB in the Eurozone. When the interest rates of a particular currency increase, more investment funds are attracted and buy that currency to achieve a higher interest return. On the other hand, when interest rates are decreasing an exchange rate is less attractive to investment funds and thus it is expected to fall against other currencies.

Interest Rates Correlations

1) Interest Rates increase ↑ → market liquidity and inflation are expected to decrease ↓ → the domestic exchange rate increases ↑

2) Interest Rates decrease ↓ → market liquidity and inflation are expected to increase ↑ → the domestic exchange rate decreases ↓