Economic growth
Besides interest rates, economic growth of countries can also have a big impact on
the overall currency market sentiment
Since the United States has the largest economy in the world, the US economy is a
key factor in determining the overall market sentiment, especially of currency pairs
that have the USD component. A robust economic expansion, coupled with a
healthy labour market, tends to boost consumer spending in that country, and this
helps companies and businesses to flourish. A country with a strong economy is in
a better position to attract more overseas investments into the country, as investors
.generally prefer to invest in a solid economy that is growing at a steady pace
Investments pouring into a country requires the currency of that country to be
bought in exchange of other currencies; this increased demand for that country’s
currency should cause that currency to strengthen against other currencies. Forex
traders, expecting this consequence, will put on their bullish cap to buy that
currency before the investors do
:Some of the most important indicators of a country’s economic growth include
1Gross Domestic Product (GDP
2the unemployment rate, and
3trade balance data
These are explained below