1. Differentials in inflation
2. Differentials in interest rates
3. Current account deficits
4. Public debt
5. Terms of trade
6. Political and economic stability
In order to best comprehend the above 6 factors, you will have to keep in mind that currencies are traded against one another. So when one falls, another one rises as the price denomination of any currency is always stated against another currency.
In simple terms, each of our clients is provided access to a trading platform (i.e. software) that is directly connected to the global market price feed and allows them to perform transactions without the help of a third party.
1. Travelers or overseas consumers who exchange money to travel overseas or purchase goods overseas.
2. Businesses that purchase raw materials or goods from overseas need to exchange their local currency for the currency of the country of the seller.
3. Investors or speculators who exchange currencies, that either require a foreign currency, to perform trading in equities or other asset classes from overseas or either are trading currencies with the aim of making a profit from market changes.
4. Banking institutions exchange money to service their clients or lend money to overseas clients.
5. Governments or central banks that either buy or sell currencies and try to adjust financial imbalances or adjust economic conditions.
A spread is a difference between the bid and the asking price of a currency pair (buy or sell price), and so to make it even easier it is the price at which your broker or bank is willing to sell or buy your requested trade order. Spreads, however, only matter with the correct execution.
In the forex trading marketplace, when we refer to execution we mean the speed at which a foreign exchange trader can actually buy or sell what they see on their screen or what they are quoted as bid/ask price over the phone. A good price makes no sense if your bank or broker cannot fill your order fast enough to get that bid/ask price.
Major pairs include: