Understanding Fundamental Analysis_2. Significance of News

Lesson 2: Significance of News

It is a fact that the most sensible perspective of a Forex trader is that the
news are responsible for movements on markets. How and why does this come
about?

Financial experts examine a lot of economic indicators to help them have
an idea about the health of the economy. Those indicators can be found in news
reports and news outlets which are published on a weekly, monthly, or even a
quarterly basis.

For this part, we'll compare technical and fundamental analysis by the
rate of data updates. With currency trading fundamental analysis, fresh data appears
every second in the form of a price quote, while fundamental indicators are released
no more than once a week.

Capital moves steadily from countries where it grows at a much slower
pace, compared to the countries where it could grow at a more rapid rate.

That process largely relies on the economy's strength. If an economy,
for instance, is expected to remain healthy, it will give the impression of an ideal
place for foreign investment because it has a better chance of bringing in more
returns in the financial markets.

To invest, the first step you need to take is to convert your capital into
the currency in question. Purchasing more of that currency will boost the demand
and push it to appreciate. Economics, however, is not that easy, which is why cases
of strong economies experiencing faltering currencies are not exactly unheard of.
Policymakers like central banks and private traders are also able to manipulate
currencies. Upon publication of economic data, traders and investors will find clues
that may help them assess the strengths and weaknesses in various economies.
If market sentiment tips in one direction before the news release, this would result in
what is known as a price in market influence inflation, investment, trade, production
and employment.