Fundamental Analysis
Fundamentals explain why currencies move. This guide covers the most important drivers: central banks, inflation, growth, and risk sentiment.
Table of contents
1) Central banks
Interest rates and expectations drive currencies. When a central bank is more hawkish (higher rates), its currency often strengthens—especially against a dovish counterpart.
2) Key indicators
Inflation (CPI)
Higher inflation can push rates higher; watch surprises vs expectations.
Employment
Jobs data affects growth expectations and policy decisions.
GDP / Growth
Growth divergence between economies often drives longer trends.
Risk sentiment
In risk-off periods, safe-haven flows can dominate fundamentals.
3) Using an economic calendar
- Focus on high-impact events for your pair.
- Trade the plan, not the headline; volatility can spike both ways.
- Watch expectations: markets react to surprises.
4) A simple framework
- Pick a pair and identify which economy is stronger / more hawkish.
- Use technical levels to time entries in the fundamental direction.
- Reduce risk around major releases if you’re new.