How to Trade the News When Trading Forex

SYDNEY, May 8, 2012 /PRNewswire/ --

Trading foreign exchange or currencies could be a lucrative choice for traders and investors wanting to tap into this liquid market.

The Bank of International Settlements (BIS), which is considered the central bankers' bank, estimates the daily turnover in the global FX market to be around $4 trillion. This makes it the largest and most liquid market in the world and it is still growing by the day.

If you are considering trading FX, City Index Australia has a number of trading platforms that will allow you to trade all the major currencies including US dollar, Euro, British Pound, Swiss Franc, Japanese Yen and other highly traded currencies such as the Australian dollar and Canadian dollar.

While the FX market is the largest in the world, it is also subject to economic and market factors that can push it up, down or sideways.

If you are keen to trade FX or if you want to build up your knowledge of this liquid market, you may want to consider a few factors that affect it including:

Fiscal and monetary policies

Budget spending or cuts by governments and the interest rate decisions by central banks are one of the major factors that can influence currency movements.

Countries with high interest rates usually have relatively strong currencies because traders and investors would like to get better returns for their money.

Geopolitical issues

While politics usually don't have a long lasting impact on currency movements, changes in governments (and therefore government policies) have the potential to cause concern and uncertainties in the FX market.

For example, the recent elections in France and Greece have had dampening effects on the Euro against other currencies. Traders who have been building long positions on the Euro over the past few months may now consider going short in light of uncertainties in the Euro zone.

Inflation

A currency will lose some of its value if a country has a very high level of inflation. On the other hand, a high inflation environment could be positive for a currency if a country's central bank raises interest rate to combat inflation.

While this is not a comprehensive list of factors affecting currency movements, it would be wise to monitor current market news and events and how they could affect your FX trades.

With City Index Australia, you can trade all the major currencies as well as monitor global and domestic news through their market commentaries and market analysis provided by their team of analysts and dealers.

About City Index Australia:

Today more and more individual traders are discovering the benefits of derivatives, and many of them are discovering them through a City Index trading platform.

City Index is a leading global provider of margined foreign exchange and CFD trading. As a group, we transact in excess of 1.5 million trades every month for individuals in over 50 countries worldwide. To learn more visit: http://www.cityindex.com.au/