In a forex fundamental analysis, we are interested in the factors or variables that will affect the foreign exchange market in any way. We call these variables indicators or non-technical indicators or simply fundamental factors. These factors include:
The interest rate in any country is the most important factor that directly affects the currency of that country. Higher interest rates in the country would lead to an increase in foreign investment in the country, leading to an appreciation of that country’s currency.
Gross domestic product (GDP)
Gross domestic product is the most important economic indicator that shows the overall strength of the economy. A fall in GDP is an indicator of a weak economy and will cause the currency to depreciate, while an increase in GDP will appreciate the currency.
The trade balance is the difference between a country’s annual exports and imports. If a country’s exports exceed its imports, this will cause the currency to appreciate on the foreign exchange market. If imports exceed exports, the currency will depreciate.
The national economies of countries with a total of almost total employment rate are considered to be very powerful and their currency appreciates on the foreign exchange market as employment increases. Those with large numbers of unemployed will cause currency depreciation.
The high inflation rate in any country will negatively affect the economy of the country. A steady increase in the rate of inflation per year is acceptable and necessary for the growth of the economy.
Fundamental analysis forex indicators play a very important role in determining the long trend of currency and when analyzed correctly, can prevent traders from making costly mistakes.