What Drives the Forex?

If you are like so many other people trading in the markets today, you probably already understand the importance of certain economic indicators when it comes to understanding what drives market volatility and what makes certain markets move up and down. However, there are inordinate amounts of data available and what most people struggle with is trying to put it all together so it makes sense. Having a blue print or fundamental model to put all the data into proper perspective is key to successfully making sense of and piecing together the big picture. The sooner you are able to develop a model, the quicker you will be to reacting to expansions and contractions in the market.

Job and Job creation are key in the medium and long term economic outlook of any country and its growing economy. When jobs are being created, people are earning more money and spending their money on goods and economic activity expands. When jobs are lost and employers downsize and manufacturing goes down, growth is stagnant and weak and consumers spend less money. The labor market is typically seen as a positive in the currency market as it is indicative of positive growth prospects going forward.

The consumer is almost nearly the most important factor next to jobs in that within the major currency economies consumer spending and personal consumption accounts for 65 to 70 percent, and sometimes more, of overall economic activity. If you want to gauge the short term outlook of an economy, look no further than the consumer. When consumers are doing well, so are economies.
Businesses and firms encompass the other third of overall economic activity after personal spending. Check out the reports emerging from the corporate sector regarding sentiment, capital spending, inventory management and production as well as hiring. These are important indicators and the top three drivers of currencies and economic markets.