More About Forex Trading

Factors affecting forex Trading:

Tthough xchange rates are fx'ed by many factors, currency prices are ultimately a result of supply and demand forces. Currency markets can be viewed as a huge melting pot: in a large and ever-changing mix of current events, supply and demand factors are constantly shifting, and the price of one currency in relation to another shifts accordingly. No other market encompasses as much of what is going on in the world at any given time as forex.
Supply and demand for any given currency (and therefore its value) aren't influenced by any single element, but rather by several.

Economic factors
Include economic policy
Economic policy comprises government fiscal policy and monetary policy.

Economic conditions include:
Government budget deficits/surpluses: Market usually reacts negatively to widening government budget deficits, and positively to narrowing budget deficits. The impact is reflected in the value of a country's currency.
Balance of trade levels and trends: The trade flow between countries illustrates the demand for goods and services, which in turn indicates demand for a country's currency to conduct trade. Surpluses and deficits in trade of goods and services reflect the competitiveness of a nation's economy. For example, trade deficits may have a negative impact on a nation's currency.
Inflation levels and trends: Typically, a currency will lose value if there is a high level of inflation in the country or if inflation levels are perceived to be rising. This is because inflation erodes purchasing power, thus demand, for that particular currency. However, a currency may sometimes strengthen when inflation rises because of expectations that the central bank will raise short-term interest rates to combat rising inflation.
Economic growth and health: Reports such as gross domestic product (GDP), employment levels, retail sales, capacity utilization and others, detail the levels of a country's economi growth and health. Generally, the more healthy and robust a country's economy, the better its currency will perform, and the more demand for it there will be.