The concept of a market driver and what to look for in trading

The foreign exchange market is the largest capital market in the world. The daily turnover on the FOREX market exceeds 5 trillion US dollars and it is growing more every year. Such a turnover in the market is explained by high liquidity, which attracts a huge number of participants from all over the world, because one of the most profitable products is the same money or currency. To earn on the FOREX market is as well as on any other – to buy cheaper and sell more expensive. Earnings are possible due to the fact that the prices of certain currency instruments are changing constantly due to certain factors, which are the market drivers. So, the market driver …

A market driver is one or another factor that has a direct impact on the change in the price of a currency instrument and its direction in the future. Among these factors there are economic, political, force majeure, as well as the movement of the stock and commodity markets.

Economic factors as a market driver

Economic factors, as a market driver, determine the direction of prices in anticipation of the publication of significant economic indicators. Which are very important on a degree of influence. These indicators include: the Central Banks interest rates changes, inflation indicators (CPI, PPI, etc.), indicators of economic growth (GDP, trade balance, indicators of the production and non-production sectors of the economy), social sector indicators (employment, unemployment and wages).

Political factors are:
Change of government, presidential election, as well as various reforms and laws that directly affect the further economic development of the region. They can affect the mood of investors in every way and have a significant impact on the exchange rate of the national currency.

Force Majeure

These factors are usually unexpected. They include destructive weather events, terrorist acts, man-made disasters. Such factors, according to their scale, carry from a mediocre and short-term to a very significant and lasting impact on the change in the price of an instrument in the market. It is also worth considering that the price of an instrument that has changed under the influence of force majeure often returns to its previous movement.

Stock and commodity market’s movement

The main stock indices of one or another country are also excellent indicators of capital flows to certain sectors of the region’s economy. It shows how attractive the economy is for foreign investors. Depending on the correlation of the stock and foreign exchange markets in the region, the movement of stock indices will be reflected in the national currency, but it is worth to remember that the deviation of the price of the index should exceed 1.0%, since with a slight deviation, the effect of the stock market on the foreign exchange will be quite mediocre. In the commodity market the main drivers are oil and gold. The dynamics of oil prices will affect commodity currencies, while gold will reflect the demand for safe haven assets.

Stay tuned on the Ester Holdings Inc. website every day to be informed what on you should focus while trading and what drives the market today.

Alexander Sivtsov