Basics of Economics – Free Training Course in Forex – Lesson 20

Fundamental analysis is the study of any information or data that is expected to affect the market price and then the change in the exchange rate, and now to shorten what we show you about fundamental analysis in quick thoughts about the influential factors in the country's economy, which we will study it in our session:

(1) The level of economic inflation.

(2) The decisions of central banks for foreign currency.

(3) Changes in interest rates on foreign currency.

(4) The issuance of the actual results to news of economic indicators in the daily news agenda.

(5) Changes in the stock indices for global stock markets for securities.

(6) Changes in the energy markets, oil, and gold and metals markets.

The level of economic inflation (Inflation rate).

Inflation means: low purchasing power of the currency against the prices of goods and services over a long period with presence of recession and the deterioration of the economy, and this means that if the leap has taken place in the higher prices do not this is called inflation, and not necessarily a rise in all prices because, even in times of inflation, severe some prices may be relatively constant or others prices may fall.

* Of the important reasons that lead to inflation is the size of the money supply in the Internal Market (Growth of money stock at the internal market).

In Forex continuously rising inflation, means a negative effect on the development of the country's economy and thus decreasing the monetary value of the currency, and therefore investors resorted to sell this currency, hit by inflation and trend to buy the currency of another better country's economy.

With the continuous rise of the prices, people realize that purchase of the day when the price levels prevailing in the purchase of a better tomorrow because the prices will go up more and more hastily to resort to foreign currency is more stable in value, which is reflected in the deterioration of the exchange rate of the currency, hit by inflation.

The inflation report may be issued monthly or annually.

Names of inflation...

(1) Price inflation: it means excessive rise in prices.

(2) Income inflation: the rising incomes in cash, such as wage inflation and profits inflation.

(3) Cost inflation: rise in costs.

This kind of inflation is created due to high operational costs in industrial companies or non-industrial, as a contribution to the departments of companies to raise wages and salaries of its members, especially workers who work at the productivity sites and the comes because of the demands of employees higher wages.

(4) Monetary inflation: the excessive of creation any cash balances.

(5) Demand inflation: inflation is caused by the increase in demand.

This the type of inflation arises from increase the size of the cash demand and which is accompanied by a fixed offer of goods and services, since the rise in aggregate demand is not offset by an increase in production, leading to higher prices. And be at its peak when running full production elements.

Hence, some believe that when it uses the term "inflation" without discrimination case , it called the meaning of this convention prices inflation because the excessive rise in prices is the sense in which the mind goes out to it directly when it the term inflation is mentioned.

In the case of:

Higher prices, leading to increase money offer relatively to demand, so currency value will decrease.

Lower prices, leading to increase demand for money relatively to offer so, the value of the currency rises.

The effects of inflation...

(1) With the increase in inflation means the intensity of price rises continuously with the devaluation of the currency.

(2) The owners of variable income, such as the merchants and businessmen, increase the level of their income usually with a wave of inflation.

(3) Damage to financial assets savers as long-term deposits in banks.

(4) The greatest damage that affects the balance of payments of the state.