Application of fundamental analysis

what is fundamental anaylsis?

Fundamental analysis is conducted mainly through analysing economic, social, and political factors that influence the market demand and supply. Investors who rely on fundamental analysis must find out the various factors that affect the economy, such as those that will boost the economy to grow rapidly, and those that will drive it down.

This method of analysis is based on the assumption that a country's currency will be strong when its economic outlook is good. The reason is that the better a country's economic conditions, the more foreign companies and investors will be willing to invest in the country, and they need to buy a large amount of local currency to acquire assets.

Application of  fundamental anaylsis?

A variety of fundamental changes will influence currency pairs. Out of these changes, interest rate expectations tend to have the biggest impact on the strength of a country's currency, and investors can trade accordingly.

If a country's released inflation data keeps surpassing the central bank's target, the central bank will influence the local currency according to its own inflation target by raising or lowering interest rates.

Usually, the central bank will raise interest rates to reduce the amount of money in circulation and curb inflation. If the central bank wishes to increase the amount of money in circulation, it may do so by lowering interest rates. Generally, as the difference between a high-interest currency with a low-interest currency widens, hot money will tend to flow into the high-interest money market, driving the demand for money higher. This is one of the reasons for the rise in medium-term and long-term exchange rates, and investors may capture these opportunities to