Just like the way fire relies on fuel, as one of the main components, to burn, the same happens in the currency market where performance partly depends on the Forex trading news. This is because the information which is released through the news is mostly about factors which affect currency stability in a region through events which are bound to happen or ones which are past already.
The most relied on news majorly come from government sources. In addition, private investors sometimes carry out highly priced business transactions which may contribute to the demand and supply of the currency in the host region. At that instance, reliance on that kind of news becomes evident in the currency market.
The currency stability of any region may be affected by news which could be addressing issues such as:
Government monetary policies:
In an effort to stabilize the currency, any government may decide to adopt a certain monetary policy. The option adopted may be may be aimed at mopping up the currency from circulation or disposing the surplus of the same. Some of the steps which could be used to achieve this may include:
– Withholding the currency from the government coffers.
– Waiving taxation on the imports or exports for a certain period.
– Release of a new currency unit into circulation.
Exports and imports growth rate:
This may be released as an analysis of the region’s trend about the exports and imports over a period of time. These activities affect the availability of the currency in a region. This occurs as follows:
– High exporting rate brings in a lot of foreign currency which raises the value of the currency.
– A high importation rate tends to lower the value of a currency.
Growth and development strategies:
News about the growth and development of a region brings about appreciation of currency since this is normally an investors’ bait. It is always expected that local and international investors will bring in more foreign currency and this is the reason for the raise in value.
The Forex trading news normally affects the currency market in a number of ways and this includes:
– The exchange rate – When a currency value goes up, this means that other players in the market who are dealing with other currencies have to spend more in order to buy it. Some traders may opt to act on speculation and buy the currency before its value goes up and later dispose it at a profit after the value increases.
– The volume traded is another area which is affected by the Forex trading news. The traders may decide to withhold the currency till the value goes up which results to low traded volumes. When the price is expected to drop as per the news, more currency is traded on in the rush to dispose before the drop in prices.
Those are some of the effects of Forex trading news on the currency market performance.