Consequently any person acting on it does so entirely at their own risk. No representation or warranty is given as to the accuracy or completeness of this information. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. This information has been prepared by IG, a trading name of IG Markets Limited. The strength of a country’s economy and the level of FDI are often directly correlated. This, in turn, can increase demand for that country’s currency, which will cause the price to rise.įor example, if there was a significant increase in FDI in the American economy, it would be expected that the value of the US dollar would strengthen relative to other currencies that it is paired with. Luckily, with the majors, such movements are less frequent – although important political events can still affect the price of sterling and euro currency pairs.įDI can affect the price of a currency pair because an increase in FDI is indicative of greater investor confidence in that country’s economy and infrastructure.
Trading a volatile market all depends on an individual trader’s appetite for risk, with some traders preferring markets with frequent movements as an opportunity to realise a quick profit. This might mean that the currency stagnates or becomes too volatile to trade. Geopolitical instability could mean that investors and traders lose confidence in a country’s ability to govern or expect that there will be difficult times ahead for the economy. Essentially, an investor will receive a higher return for their initial capital in an environment with higher interest rates. This is because investors will tend to favour countries with higher interest rates than those with lower interest rates when they are deciding where to store their money. For example, if the US Federal Reserve (Fed) raises interest rates it will usually cause the US dollar to strengthen against the euro, causing the price of EUR/USD to drop. Interest rates are controlled by the monetary policy of that currency’s respective central bank. These include interest rates, geopolitical instability, the strength of their country’s economy and the level of foreign direct investment (FDI) in the domestic market. There are a number of factors that affect the price movements of every forex pair. EUR/JPY is not as volatile as some of the other pairs on this list, but it still offers ample opportunities for traders. Liquidity in the EUR/JPY pair is often concentrated between 8:00 and 15:00 (UK time).
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