Market demand does affect forex prices, but it operates differently than in traditional markets due to the nature of currency trading. Forex is influenced by factors like interest rates, economic indicators, and geopolitical events rather than pure supply and demand. While demand for a currency can drive its value, other forces such as central bank policies, global trade, and investor sentiment also play significant roles in determining currency prices.
Supply and demand is what moves price in ALL freely traded markets. FX included. Economic and geopolitical factors affect supply and demand decisions, same as earnings and interest rates.
Forex prices are influenced by a complex mix of factors beyond basic supply and demand. Economic indicators, interest rates, central bank policies, and geopolitical events all impact currency values. While demand can affect prices, market sentiment and global economic conditions often have a more significant influence in forex trading.
supply and demand are the driving forces behind price movements in any market, including FX. Economic indicators, geopolitical events, and even sentiment shifts play a critical role in shaping those dynamics, just like earnings and interest rates do in equity markets.
Forex prices are influenced by a mix of factors, including interest rates, economic data, and geopolitical events, not just demand.
This is a very interesting time to become a Forex trader and a specialist in a few liquid currencies. Looking back, The US has seen the Euro as a threat since around 2008-2009. And has been actively attacking the EU as a competitor to USA. I think the reason is that in order for traders to ignore the hellish fundamentals and printing of the USD..all other liquid currencies need to look even worse in relation (cross). Particularly The Euro. But Sterling has also been attacked within the same political questioning as the EU (socialist politics). And Swiss banks and currency became way too strong..so USA demanded all the best swiss banking elements to be removed. And Japan also..penned into a corner on any real competition against the USD ..even tho both currencies have been printed into oblivion . However..I think Brics was biding its time in regard to a unified currency. And Now..Russia is in a position to Seize all of the EuroClear assets in Hong Kong..which would jeopardize the position of the Euro as a global reserve currency and undermine the Euro stability in general. So..we are looking at a stronger and stronger USD going forward..weaker and weaker Euro, Swiss franc, Japanese yen..under Trump. And some serious weakness of emerging market currencies (Particularly currencies under influence of USA or near them like Phil Peso, Colombian Peso, Thai Baht, Canadian Dollar and Aussie Dollar). Oddly, mexico and the mexican peso looks strong in relation to USA and the USD.
If supply and demand drive all markets, including Forex, how do you reconcile this with instances where central bank interventions or fixed exchange rate policies override natural supply and demand dynamics?