Forex pair and CFD constantly change in price, from day to day to minute to minute. Price changes can be small, and measurable in the tens of pips, or price changes can be huge and measured in the tens or hundreds of dollars.
Numerous factors push and pull on a market’s supply of and demand for forex pairs and CFDs which lead to price movements.
Economics and politics
In respect to Forex pairs, a major factor that can affect their pricing are economic and political events. Forex traders will watch for and interpret economic and political developments in the countries directly or indirectly related to the currencies that they are trading. Positive economic data can mean that a country’s currency could be expected to appreciate relative to another currency, while worrying political events may cause a country’s currency to depreciate relative to another currency.
Central banks
The actions of central banks are also a major factor that can affect the pricing of forex pairs. A central bank’s plan to hike or lower interest rates is perhaps the most potent of these actions. Central banks can also intervene in the forex markets for the sake of artificially strengthening or weakening one currency relative to another. To do this, a central bank will buy its own currency using its foreign currency reserves or sell its own currency and acquire foreign currency reserves.
Market sentiment
However, sometimes currency prices change irrespective of, in excess, in lack of, or even counter to, what might be expected in reaction to economic, political, and central bank factors.
In these cases, traders might be acting irrationally or considering and weighing factors outside these realms as more important.
