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Exchange rate decision theory and economic data interpretation (IV)

Four monetar Forex rebate k cashback forexgt Forexrebateking forexrebateindonesia theory 1. Theoretical elaboration After the collapse of the Bretton Woods system, the exchange rate lost its objective material basis to maintain stability, its fluctuations are frequent cashbackinforex violent people found that the exchange rate fluctuations in the foreign exchange market showed the same characteristics as the price of stocks and other assets, such as extremely frequent changes and volatility, by the psychological factors of expectations are very influential This inspired people to look at the exchange rate as an asset price monetarist exchange rate theory is mainly represented by Frankel, Dornboutz and other American economists, whose characteristics are to emphasize the role of the money market in the exchange rate decision exchange rate is the relative price of the two countries currencies, rather than the relative price of the two countries products exchange rate by the money market to determine the stock of money, when people are willing to hold the existing stock of the two countries currencies, the exchange rate will reach At the same time, it is also called "flexible-priceMonetaryApproach" because it assumes that prices are completely flexible and variable. The basic model shows that foreign exchange rate changes are proportional to the supply of domestic currency and inversely proportional to the supply of foreign currency. The theory emphasizes that nominal interest rates and inflation move in the same direction 2. Interpretation of economic data The model shows that if a countrys money supply increases significantly, the purchasing power of the countrys currency decreases and, according to PPP, the countrys exchange rate falls, i.e., the countrys currency depreciates Another way to look at it is that if a countrys economy is growing rapidly, but if there is no significant For example, the long-term stable growth of the Chinese economy is one of the intrinsic reasons for the appreciation of the RMB. September 6, 2007 foreign news reported that the U.S. Federal Reserve (FederalReserve) 6 released the latest week of money supply report, adjusted for seasonal factors, M1 supply rose $ 15.2 billion to $ 1.368 trillion; M2 supply rose $ 64.9 billion to $ 7.4 trillion above data for the week of August 27 2) GDP Gross Domestic Product (GDP) is the value of all final goods and services produced in the economy of a country or region in a certain period (a quarter or a year), and is often recognized as the best indicator of a countrys economic situation. In general, there are four different components of GDP, including consumption, private investment, government spending and net exports, expressed by the formula: GDP: C+I+C+X, where C is consumption, I is private investment, C is government spending and X is net exports. It is the practice to estimate and count the GDP once a quarter. If there is an increase, it means that the economy is faster, which is favorable to the appreciation of its currency; if there is a decrease, it means that the economy is slowing down and its currency is under pressure to depreciate. In this case, the countrys central bank will likely raise interest rates and tighten the money supply, as the countrys good economic performance and rising interest rates will increase the attractiveness of the countrys currency. Therefore, in general, high economic growth rates will drive the exchange rate of the national currency up, while low economic growth rates will cause the exchange rate of the national currency to fall. 11 countries in the euro area, except Ireland is higher (9.0%), France, Germany, Italy and other major countries GDP growth rate of only 2.2%, 1.5% and 1.2%, much lower than the level of the United States This prompted the euro since the launch of January 1, 1999, the exchange rate against the dollar all the way down, in less than two years depreciated by 30% But in fact, the economic growth rate differences on the exchange rate movements produced A. A high rate of economic growth in a country means an increase in income and a higher level of domestic demand, which will increase the countrys imports, leading to a current account deficit, which will cause the exchange rate of the national currency to fall B. If the countrys economy is export-oriented and the economy grows to produce more exports, the growth in exports will compensate for the increase in imports and slow down the pressure on the exchange rate of the national currency to fall  C. A countrys high economic growth rate means that labor productivity increases quickly, lower costs improve the competitive position of domestic products and help increase exports and suppress imports, and high economic growth rate makes the countrys currency in the foreign exchange market is bullish, so the countrys currency exchange rate will have a tendency to rise 3) PersonalIncome (PersonalIncome) Personal income includes all income from wages and social benefits It forecasts future changes in the level of consumer demand, thus reflecting the general level of overall economic activity 4) Industrial Production Index (IndustrialProduction) Industrial Production Index reflects the total production of the United States production and manufacturing industry, usually in line with the countrys economic development The higher the level of industrial production, the better the momentum of economic development, capital investment is also more, thus driving 5) National Association of Purchasing Managers Index (NAPM) NAPM index is generally published on the first Monday of each month, reflecting the level of activity in the manufacturing sector, often earlier than the unemployment rate to reveal the end of the development of economic activity changes in the previous month The index above 50% is considered to be the expansion of the manufacturing sector, below 50% means that the economy is shrinking 6) Business Inventory ( BusinessInventory) business inventories reflect the business sectors demand for short-term credit business inventories increase, which may drive up short-term interest rates, economic development slowed, indicating that the economy may enter a state of stagnation, serious cases may indicate the beginning of economic recession 7) Equipment Starts (HousingStarts) used to measure the existing plant and equipment idle situation. The opening rate rises, indicating the opening of economic expansion usually 80% of the equipment opening rate is considered to be the normal idling of factories and equipment, 83%-85% or more means that the economy is facing inflationary pressures, interest rates tend to rise pressure also become larger 8) Factory orders (FactoryOrder) factory orders reflect the consumer, manufacturers or government on the future output demand
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