Fundamental factors are key macroeconomic indicators of nation economics condition acting in middle term outlook and influencing currency market participants as well as currency rate level.
Usually these are macroeconomic statistics data published by national statistics establishments (in the USA Ministry Statistical Offices). Informational agency Reuters provides users with up to date statistics data at the moment of their release. Publication schedule of statistics data in various countries is well known: which day and what time these or those figures will be officially announced and instantly transmitted via Reuters system appearing at Reuters monitors all over the world.
On certain days of the week there are weighted averages economists and data research centers forecasts about the expected indexes of national statistics (FORECASTS column). There is the time of their publication as well as previous values of indexes (REVS column). These data are thoroughly analyzed by dealers and analytical departments of banks and based on them there is a scenario of currency rate movement as well as arbitrage transactions tactics.
Usually on world currency markets with 80% of arbitrage operations carried out with the US dollar the most influenced are data on the USA economics leading to decreasing or increasing dollar rate against other currencies. We may distinguish two time aspects of fundamental factors influencing currency rate:
- Long-term influence, i.e. the certain inventory of fundamental factors determining national economy state and as a result trend of currency rate change within months and years. Such short-term rate forecasting is used for opening strategic positions. For example long standing credit trade balance in the USA and Japan is the reason for a constant dollar decrease to the Japanese yen (from 250 in 1985 to 80 in 1995). For middle- and long-term influence statistic indicators for a period more than a month (quarter, year) are considered.
- Short-term, i.e. influence of the released statistics indicator on currency rate that is actual for several hours or even minutes. For example release of data on decrease in balance of trade deficit in the USA and Japan can lead to a certain (with 88,20 to 89,50). Short-term influence on rate is made by short periods (week or month).
Currency dealers making decisions about currency buy or sell after appearing on screens indications about this economic indicator must instantly answer the set of questions from which depends the amount of profit or loss.
