I get it,  you have been spending so much time searching for facts that will help you identify the main factors that affect forex trading rates. Perhaps you have also tried attending coaching sessions about the right way to trade FX but you still find it very difficult to figure out the best strategy to predict the behavior of rates in the market.  This is where a thorough understanding of the basic factors that provide a huge impact on currency rates. You will soon find out that these factors on our list normally happen in our day-to-day life but we sometimes fail to identify their importance towards our trading business.  Today,  I shall help you identify these factors so that the next time you would see these things being flashed as a news report or discussed on the different media platforms, you would be able to listen to the details intently and use these pieces of information to predict the behavior of currencies.

4 Factors that affect Forex rates

Economy

 As economic experts say,  forex rates play a great impact on the economy of a particular country. This fact is undoubtedly true,  but what if we try to see it the other way round, will the economy affect forex rates?  The answer is yes, overall,  the economic status of a particular country can create an influence on traders.  If for example, the economic status of a particular country goes lower,  traders will think that FX rates will also depreciate. The same thing happens when a country’s economic status gets stronger. They will most probably hypothesize that the rates will get higher making the currency stronger.  This factor explains why the US dollar and other first-world currencies have high value in the market.

Politics

Situations such as elections and political unrest could influence prospective investors to put on their business in a particular country. If a country has few investors,  it has very little chance to provide opportunities for its citizens to be employed for work thereby causing commotions or rallies.

Trade terms

trading agreements between countries can also lead to the increase or decrease of currency rates.  Though this could somehow strengthen the economy,  a potential drawback has something to do with the restrictions of trading with other countries.  Some agreements may prohibit doing business with other countries that are not in ally with the parties that are part of the trade term or agreement.

Pandemic

outbreaks and diseases caused by either viruses or bacteria may gravely affect the forex trading market.  This happens because people or the citizens will be scared to get out of their homes because they are scared to acquire the disease.  Thus,  some businesses will no longer operate and this will result in lesser economic revenues.

Conclusion

These above-mentioned factors are usually the most feared situations that every trader would encounter. Most if not all of these things could inevitably happen inevitably. But as a trader,  you should not let these situations hinder you from enjoying the great profit. All you have to do is discover the most perfect timing to make a move and place your trades.