Traders should know about the different types of news which influence the price movement of the currency pair. But, some traders ignore the fundamental analysis. And so, they face the troubles. Technical analysis is important for traders. Because without sharpening these skills, the traders can’t identify the situation properly. But, some traders avoid the fundamental analysis for good. That’s why they face problems to trade for a long time. However, being a retail trader, you also need to know about the fundamental analysis which will aid you to predict properly.
In this post, we’ll demonstrate some micro-economic factors which might help you to make the right decision. So, let’s discover these together.
Financial conditions
If the countries’ financial condition is not good, traders should not choose the currency of its. Because it might cause a great loss. Bear in mind, the economic events are so important because this can shake the whole industry. That’s why you should keep the economic journal so that you can know about these events. Normally, if the countries’ financial condition is good, the demand of the currency will be increased. As a result, the value will be increased. On the other side, if the condition goes down, the demand will be decreased.
Interest rate
Interest rate also plays an important rate. If the interest rate increases, the value will be increased. On the other side, if the situation goes opposite, the value will be decreased. That’s why traders should aware of this issue. Every year, the central bank of all countries calls a meeting and decides whether they will increase the interest rate or not. Most of the time, to keep the economy stable, the central bank decrease or increase the interest rate. So, you should also need to know about this. Without knowing the impact of the interest rate, you will never become a skilled trader in the ETF trading industry. So, take your time and learn more about the impact of interest rate.
GDP
GDP is also an important factor. If the GDP rate is high, you may choose the currency of the specific country. Because the value will rise. If the unemployment rate of the country decreases, there is a possibility of increasing the GDP. In some countries, political conditions go worst. For this reason, they face various sorts of difficulties. As a result, they fail to keep the financial stability. But, some countries take the right actions so that they can catch the eye of the clients.
Export vs. import
You also need to check the export and import rate of the country before taking any major decision. Because, if the import rate is higher than the export rate, the value may be decreased. So, to get a better result, you need to choose the currency of the country which export rate is higher than the import rate.
Inflation rate
Due to increasing the inflation rate, significant fluctuations are seen in the price movement of the trading instruments. So, if you avoid this issue, you might face trouble. Always remember, the relation between the inflation rate and the value of the currency is the opposite. So, it refers, if the inflation rate goes higher, the value will be lower. On the other side, if the inflation rate is low, the value will be high.
However, due to natural calamities, sometimes, demand and supply decrease or increase. So, if any big natural disaster occurs, you should contemplate this issue. Do not take any action immediately after the news releases. Because, if you do so, you may face problems. Besides this, always try to collect the news from trustworthy sources. Or else, you may get the wrong news. Some traders take the measures based on the wrong news and thus lose their money. So, you need to justify the news properly. And learn to analyze the news precisely to take the right measures.
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