How Foreign Exchange works | Business Research and Insights

Foreign exchange (FX) can be viewed as a barometer of a nation’s economic health, when compared to the economies of other nations. By understanding and interpreting how currencies move, investors can access a range of opportunities, including to enhance offshore investments or seek returns from pure FX plays.

What moves the barometer’s needle?

Currencies are affected by numerous factors, including geopolitical events, trade data and central banks’ monetary policy.

Countries with high employment and wage growth likely have strong consumer spending. When populations spend it boosts local company profits, encourages businesses to spend for growth, and increases government revenue from taxes. It all adds up to strong economic growth.

Investors, both individuals and institutions, and even other governments notice that prosperity and look for options to invest. This…