Supply and demand for currencies
A currency rises when demand for it grows faster than supply, and falls when the opposite happens. Fundamental analysis studies the economic forces behind that demand.
The main drivers
Interest rates
Higher interest rates tend to attract investment into a currency. Central bank decisions, such as those of the US Federal Reserve or the European Central Bank, often cause large moves in major pairs.
Inflation
High inflation erodes a currency's value and influences what central banks do next.
Economic data
Releases such as employment reports, GDP and retail sales can move prices sharply within seconds, especially when they surprise expectations.
Risk sentiment
In uncertain times, investors often move money into currencies seen as safer, such as the US dollar, Japanese yen or Swiss franc.
Using an economic calendar
An economic calendar lists upcoming releases with their expected impact. Many beginners avoid opening trades just before high-impact releases, because spreads widen and prices can jump past stop losses.
A note for Tanzanian traders
Most traders in Tanzania trade major pairs, so the important news usually comes from the United States, the Eurozone, the UK and Japan, not from local data. Releases often happen in the afternoon East Africa Time.