Factors that affect the forex market

Forex markets can be some of the most volatile in the financial world. Knowing the internal and external factors that affect forex can get you ready to trade these markets. Internal factors that affect forex Internal factors are components affecting forex strategy that are specific to the trader’s experience level and can be in their control. Internal factors affecting the forex market include: A trader’s knowledge of the market can better prepare you for large market movements. Learning not only the basics like how pairs move and how to place a trade but also more in-depth contexts such as how forex pairs are priced and when is a good time to trade can help new forex traders get started. Global currency insight can be gained by following news related to global markets and exploring the historical price action of major forex pairs over the different time zones of the last day as well as weeks, months, and years in the past. Financial literacy is essential in any asset class, and in forex markets it can mean understanding leverage as well as economic trends that use charts and technical or fundamental analysis. Forex brokers can range in the benefits that they supply traders. Many traders assess platform technology, customer service, and trading costs when choosing a broker as these items might affect an individual’s trading. External factors that affect forex External factors can affect forex market movement while usually being out of the trader’s control. However, an awareness of the following factors can help in managing risk and preparing for the next opportunity: Global market news can be relevant to the volatility in the forex market. Ongoing events such as stock market crashes or supply-chain issues can shift the relationship between two regions as well as their exchange rate. Geopolitical conflict can result in war that has many effects on a country’s economy, which then might move their currency in the forex market. Economic data can have a large influence over where forex markets trade in the short term around the release and also trend in the long term. For example, employment data can promote strength or weakness for its coinciding currency, which can be a source of opportunity for traders looking to utilize market volatility. Interest rate environments are often compared between regions resulting in corresponding price action. For example, higher interest rates in the US relative to those in the UK can conclude in dollars outperforming pounds, and vice versa. Ready to start trading? Open a live or demo account today What currencies are available in the global forex market There are over 80 currency pairs available to trade in the IG forex market. Some are more popular than others, but all can provide great opportunities for traders. Forex pairs categories include major, minor, Australasian, Scandinavian, and Exotic markets. Currencies are represented by a three-letter code which tend to start with the currency region in two letters and one for the currency itself. For example, “GBP” is Great British Pounds. Major forex pairs Some of the most popular pairs in the forex market are the major pairs that tend to trade in high volumes, represent large economies, and can incur large amounts of market news. The major pairs are as follows: GBP/USD – British pound vs US dollar EUR/USD – euro vs US dollar EUR/GBP – euro vs British pound USD/JPY – US dollar vs Japanese yen AUD/USD – Australian dollar vs US dollar USD/CAD – US dollar vs Canadian dollar EUR/JPY – euro vs Japanese yen USD/CHF – US dollar vs Swiss franc GBP/EUR – British pound vs euro Minor pairs Minor currency pairs are often traded less frequently than major pairs but can move with greater volatility. The minor pairs are as follows below: GBP/CHF – British pound vs Swiss franc GBP/JPY – British pound vs Japanese yen EUR/CAD – euro vs Canadian dollar GBP/CAD – British pound vs Canadian dollar CAD/JPY – Canadian dollar vs Japanese yen CHF/JPY – Swiss franc vs Japanese yen CAD/CHF – Canadian dollar vs Swiss franc USD/ZAR – US dollar vs South African Rand USD/SGD – US dollar vs Singapore dollar GBP/SGD – British pound vs Singapore dollar SGD/JPY – Singapore dollar vs Japanese yen GBP/ZAR – British pound vs South African rand EUR/SGD – euro vs Singapore dollar USD/HKD – US dollar vs Hong Kong dollar EUR/ZAR – euro vs South African rand ZAR/JPY – South African rand vs Japanese yen Regional pairs The regional pairs are currency pairs that relate to specific regions in global forex. The Australasian and Scandinavian are the common regional pairs markets, and they are as follows: Australasian pairs EUR/NZD – euro vs New Zealand dollar GBP/AUD – British pound vs Australian dollar EUR/AUD – euro vs Australian dollar AUD/NZD – Australian dollar vs New Zealand dollar GBP/NZD – British pound vs New Zealand dollar NZD/JPY – New Zealand Dollar vs Japanese yen AUD/JPY – Australian dollar vs Japanese yen AUD/CAD – Australian dollar vs Canadian dollar AUD/CHF – Australian dollar vs Swiss franc NZD/CAD – New Zealand dollar vs Canadian dollar AUD/SGD – Australian dollar vs Singapore dollar NZD/CHF – New Zealand dollar vs Swiss franc NZD/USD – New Zealand dollar vs US dollar Scandinavian pairs EUR/NOK – euro vs Norwegian krone USD/NOK – US dollar vs Norwegian krone GBP/SEK – British pound vs Swedish krona USD/SEK – US dollar vs Swedish krona GBP/NOK – British pound vs Norwegian krone EUR/SEK – euro vs Swedish krona CHF/NOK – Swiss franc vs Norwegian krone NOK/JPY - Norwegian krone vs Japanese yen CAD/NOK – Canadian dollar vs Norwegian krone GBP/DKK – British pound vs Danish krone EUR/DKK – euro vs Danish krone NOK/SEK - Norwegian krone vs Swedish krona USD/DKK – US dollar vs Danish krone SEK/JPY – Swedish krona vs Japanese yen Exotic pairs Exotic pairs include major currencies against currencies from smaller economies. These currency pairs are typically the least traded pairs in the market. They are as follows: USD/HUF – US dollar vs Hungarian forint USD/MXN – US dollar vs Mexican peso USD/TRY – US dollar vs Turkish lira EUR/MXN – euro vs Mexican peso EUR/TRY – euro vs Turkish lira PLN/JPY – Polish zloty vs Japanese yen EUR/CZK – euro vs Czech koruna USD/CZK – US dollar vs Czech koruna USD/PLN – Us dollar vs Polish zloty GBP/TRY – British pound vs Turkish lira EUR/ILS – euro vs Israeli shekel GBP/PLN – British pound vs Polish zloty GBP/HUF – British pound vs Hungarian forint GBP/ILS – British pound vs Israeli shekel GBP/MXN – British pound vs Mexican peso GBP/CZK – British pound vs Czech koruna EUR/HUF – euro vs Hungarian forint MXN/JPY – Mexican peso vs Japanese yen TRY/JPY – Turkish lira vs Japanese yen Emerging markets forex pairs Emerging markets forex pairs can include currencies of emerging economies, but they are often based on the Chinese yuan (CNH). Emerging markets pairs are as follows: AUD/CNH – Australian dollar vs Chinese yuan USD/CNH – US dollar vs Chinese yuan EUR/CNH – euro vs Chinese yuan GBP/CNH – British pound vs Chinese yuan NZD/CNH – New Zealand dollar vs Chinese yuan CAD/CNH – Canadian dollar vs Chinese yuan CNH/JPY – Chinese yuan vs Japanese yen
This information has been prepared by IG, a trading name of IG US LLC. This material does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. You should not treat any opinion expressed in this material as a specific inducement to make any investment or follow any strategy, but only as an expression of opinion. This material does not consider your investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. No representation or warranty is given as to the accuracy or completeness of the above information. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. Any research provided should be considered as promotional and was prepared in accordance with CFTC 1.71 and designed to promote the independence of investment research. See our Summary Conflicts Policy, available on our website.
Publication date:
2023-01-23 09:21:32 (GMT)

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