What Drives Foreign Currency Movement?
Economic factors are the main stimulus behind currency movements. These factors can take many different forms, and often speculation surrounding a particular event can move currency rates as much as if the event actually happens. Often we hear of figures being released regarding sales, housing, employment or industry, but what do they actually mean? These figures are indicative of the state of the economy. For example, retail sales data for the UK would show how consumers here have been spending in Britain. If these figures are good it shows a lot of consumer confidence as a result of high spending. This could eventually lead to an increase in inflation – general price levels rising. A good way to combat inflation would be to raise interest rates to curb spending. If housing data released shows less mortgages approved or house prices falling, the Bank of England may well cut interest rates. This would be in an effort to stimulate the housing market. If base rates are cut it means borro
