The foreign exchange market is one of the largest markets in existence today, with a turnover of more than 5 trillion dollars in a single investing day, which is remarkable considering it only deals in a single commodity and has no physical location where trading can occur. It deals primarily and singularly on the buying and selling of currencies in the world money market, and the essence of the trades done here is that one hopes to purchase a single quantity of a currency, using another currency, in the hopes that the strength of the currency will strengthen in the end.
The whole market actual had it start in 1970, where the entire world shifted their currency calculators to the floating exchange rate, from a regime that was outdated and could not survive in the neo liberalist market that was growing at an exponential rate all over the world. It has become one of the largest and most liquid markets in the world, with a population of central banks, governments and financial institutions being the money market makers, and the rest of the population consists of brokers, professional analysts and investors and a large population of retail investors. What you need to know about the market that it basically operates on a single factor, which is the exchange rate, or the floating exchange rate as it was previously called.
The value of a country’s currency will shift in accordance to how the Forex market moves and behaves, which explains why governments have such a high interest and stake in it. Economists and financial analysts all agree that the floating exchange rate is much preferred to a fixed one, and this is because of their elastic nature, allow a country and nation to adjust the impact of increases and decreases to their currency strength, and set up contingency plans and executions that will pre-empt factors like having the change where there will be a ‘balance payment’ crisis. Besides, the whole point of the free marker is to allow equal opportunity and experiential circumstances to determine the value and playing field of the market itself.
This is why the exchange rate is so important and any one who is in the playing field of the Forex market will tell you that the US and Euro Exchange rate are the prime currencies that are getting the most attention. The Euro is getting more attention nowadays because of the rate in which the Euro is going down, being dragged by the failing US economy. If you are trading, you might want to take a closer look at the European markets and how the governments are planning to shore up the downturn that is affecting them. Already, sparks of inflation are about to occur and the prices for Euro made products are sky rocketing following the decreased global demand. The exchange rate is important because it can determine how other strategies are going to develop. Looking to buy more US dollars? Look at how the Euro is performing and it may be time to buy!