fundamental factors

Exports and imports
The stronger the desire for foreign goods and services used abroad, the higher the price has to offer for foreign currency. With the growth of national income increases the demand for imported goods. This causes a tendency to reduce the cost of the national currency. On the other hand, the higher the national income abroad reduces the price of foreign currency. All this happens because of "the country's propensity to import": the growth of national income leads to increased imports of almost the same extent that the increased domestic consumption.
capital flows

If investors are seeking more foreign debt, bonds, stocks, bank deposits or cash, they bid up the price of foreign currency. In contrast, payments to other countries in a particular state contributed to the increasing rate of its currency.

This factor, which determines the movement of capital, which is closely related to currency speculation. If it were only on the export of goods and payments for current transactions, the foreign exchange rate, could have been dull and fluctuated only slightly.

Thus, small fluctuations in the exchange rate is often exacerbated by spontaneous movements of "hot money" that move from one country to another at any hearing of the impending problems, change of political direction or currency fluctuations. When this "capital flight" begins on a large scale in one direction, it can lead to sharp movements in exchange rates and even a financial crisis. The output data and the expectation

On the concept of "data" may include the following events: exit (publication) economic indicators of host countries traded currencies, the reported changes in interest rates in these countries, reviews the state of economies and other events that have a significant impact on the foreign exchange market (for example, the end of the financial in Japan on March 31, presentation of the Minister of Finance to Parliament the draft state budget, etc.).

Waiting for an event and the onset of this event are powerful engines of exchange rates. Hard to say, which has a strong influence on the market, the event itself, or its expectation, but we can say with confidence that the output of major data can lead to significant and lasting movements in exchange rates. These include: Nonfarm payrolls, GDP, Industrial production, CPI, PPI, and others.

Date and time of release of an indicator known in advance. There are so-called calendar of economic indicators and the most important events in the life of the individual states (with specific dates or approximate time of their release). For these events, the market is prepared. There are expectations and forecasts of the value of an indicator can go and how it can be interpreted.

The output data can lead to sharp fluctuations in exchange rates. Depending on how market participants apostrophe and interprets a given indicator, the rate can go as one and the other side. This movement of course can lead to a strengthening of an existing trend, it correction or the beginning of a new trend. Or that the outcome depends on several factors: market conditions, economic conditions of host countries examined rates, preliminary expectations and sentiment, and, finally, the values of a particular indicator.

For example, after a series of increasing values of indicators: GDP, Nonfarm payrolls, CPI, PPI may appear on the market talk of a possible increase in U.S. interest rates. Even if this change occurs within a few months now actively start to buy U.S. dollars against other currencies. Thus, the up-trend begins in the U.S. dollar - a steady strengthening of the dollar against other currencies. After the release of posts about changing rates could begin the correction in this movement.

With the release of any data (or any information affecting the market) are related to the following proverb: "Sell the good data on exit» (sell good news), and "buy on rumor, sell on fact» (buy on rumor, sell on fact .) These sayings are suitable for situations when the market expects of an event.

Even before the release of information about the event there is a movement of the course in a certain direction (the direction of the interpretation of future events), ie market is "laid." So often after the data (if the information meets expectations) is moving in the opposite direction. This is due to the fact that expectations were open position and when there was something waiting for - is the closure of these positions. There is a so-called «profit taking» (removal of profits). Situations where these events occur, characterized by the expression «priced in» (ie the onset of this event is already built into the price - which means a rate of one currency against another). Activity Funds

The first place for its effect on long-term trends in the movement of exchange rates hold funds (hedge funds, investment, insurance, pension). One of the directions of their activity - it is investing in certain currencies. With its huge resources, they are able to make the course a long time to move in a certain direction. Management of the funds involved in fund managers (fund managers). They are true professionals.

The largest and most active are American funds, which have assets in the hundreds of billions of dollars. In order to maximize the benefits of asset allocation from time to time they change the structure of the investment portfolio, investing in various investment vehicles - stocks of corporations, government and private bonds, bank deposits, etc. If it turns out that the profitability of foreign bonds is higher than domestic, this leads to massive sale of the latter, transfer of funds from the national currency in foreign money and investing in foreign securities. The national currency at the same time decreases.

A more thorough study of this factor can be reduced to the level of interest rates and the overall profitability of investment in the economy, which is a root cause of these changes, while the movement of capital - is a direct process that leads to a medium of exchange rate changes.

Quotes from politicians
The statements that may affect the movement of exchange rates, appear during the various reports, summits, meetings, press conferences, etc. (For example, the G7 leaders meeting or a press conference after a discussion of interest rates).

The journalists of news agencies (Reuters, Bloomberg, etc.) are closely monitoring such speeches, and in real-time hottest insert statements in the news columns of their agencies (so-called hot lines or hot news). By the force of impact on the market these statements can be compared to economic indicators.

Most often, the date and time of a speech known. For these events, the market is prepared, so shortly before the onset of their predictions or rumors emerge that can be said and how it can be interpreted. However, there are times when it happens suddenly on the market. Then the market could start strong movements in exchange rates, which are not always predictable.

Thus, after the sensational reports of the resignation of Finance Minister Oskar Lafontaine of Germany (Oskar Lafontaine), known for his leftist views, the single European currency (euro) against the U.S. dollar has risen by almost 400 points in just two hours.

If these or other statements carry a long-term effects (eg, the ability to change interest rates, the principles of formation of the state budget, etc.), these movements can become a long-term trends.

For example, two times a year (winter and summer), all markets are closely watching the performances of the head of the Federal Reserve Alan Greenspan before the two banking committees of the U.S. Congress (Humphrey Hawkins testimony). During these presentations, market participants are attempting to find in his words, even a small hint at the future direction of changes in interest rates in the United States. Depending on how market participants apostrophe and interprets the words of Greenspan may be established or that the trend of the U.S. dollar.

In relation to the political leaders there is such a thing as "ogovarivanie course." This means that at some point in time when the currency reaches levels that are unfavorable for a particular state, they begin to say that, in their opinion, the course is not going on that they will not allow further movement is possible that the intervention and so n And because these people are afraid to trust, or their powers and knowledge, then their words are beginning to have a direct impact on the market.

When the course is truly at a critical level, then the following statements may be followed by interventions by central banks. And this is a very strong event - the course can take more than one hundred points towards the direction of intervention in a short time (sometimes minutes). In addition, the intervention may cause market participants wary of open positions in the old direction. This, in turn, could lead to a landslide movements of the exchange rate.

The following are the positions of government officials and high ranking officials, whose opinion has an impact on the market.