1. Expectation of data release and release itself.
Data can be in the form of publication of economic indicators of countries where currencies are nationally traded, news of interest rates, economic preview and other important events affecting the currency market.
Periods before future events and events can strongly influence currency fluctuations. Sometimes it’s hard to find what causes more influential – waiting or upcoming events, but serious events always cause significant fluctuations and often continue. The time and date of the upcoming event is reported earlier.
Information about the most important events in a particular country is published in the economic calendar. Before events occur, predictions about their effect on the exchange rate of a particular currency are published in the analysis estimates. Furthermore, by anticipating events, the exchange rate starts to move in the predicted direction and often, after a proven estimate, the exchange rate starts to move in the opposite direction. This happens because traders close open positions during the expected period.
2. Fund activities (investment, insurance and pension funds) have the greatest impact on long-term currency fluctuations.
Fund activities include investing in a variety of currencies, large capital makes them able to change the exchange rate in a certain direction.
Capital management is carried out by the fund manager. Fund managers have their own methods, therefore, positions opened by managers can be in the short, medium and long term.
The decision to open a position is made after going through analysis (fundamental, technical and other) on the market. When opening a position prematurely in the right direction, managers provide a planned strategy and estimate the consequences of events, indexes and news. Market analysis can never provide 100 percent accurate results, but large capital funds and proven strategies can begin to correct and improve the strongest trends.
3. Import and export companies show Forex users which activities affect currency fluctuations because exporters are always interested in selling currencies and vice versa.
Export and import companies have an analysis department. They predict the exchange rate for buying or selling currencies that are far more profitable. Following trends is also very important for exporters and importers in the context of protection against currency risk. Opening transactions that are contrary to future transactions can minimize these risks. The influence of exporters and importers on the market is only in the short term and does not create global trends, because the volume of their transactions is not significant in the market size.
4. Statements made by politicians during meetings, press conferences, conferences and reports can have a serious impact on currency fluctuations.
Their influence can be compared to one economic indicator. Almost all the dates and times of the statement are predetermined and the consequences of the statement are predicted. However, sometimes the statement is unpredictable and causes fluctuations that are often unpredictable and strong.
Statements containing data on long-term consequences (such as changes in interest rates or the federal budget) can initiate long-term trends. When the level of value is in critical statements can lead to central bank intervention. This is considered to have a significant influence on the market. Within minutes, the exchange rate can move hundreds of points in the direction of intervention.
5. The government influences the market through the central bank.
Currency exchange transactions carried out without any intervention from the central bank will cause national currencies of certain countries to change freely. But this is a rare situation. Countries with such exchange rates can sometimes affect the exchange rate through currency transactions. Countries that are interested in consumption growth and industrial development regulate exchange rates.
They use more direct and indirect regulations. Indirect regulation causes the level of inflation, the amount of money in income, etc. Direct regulation includes cutting policies and currency interventions.
Currency interventions related to increased expenditure and income of large volumes of currencies from international markets. Central banks do not reach the market directly because they use commercial bank banks. Volume amounts to millions of dollars; Therefore, intervention can greatly affect currency fluctuations. Sometimes central banks from different countries carry out joint interventions in the currency market.