FUNDAMENTAL
ANALYSIS
Forex fundamental analysis

As in any market, capital markets and money markets, investors put their money at risk by evaluating potential future profits and risks. On the other hand, these markets are governments, corporations, and other institutions that raise funds for their activities.

Monetary policy

Monetary policy maintained by Central banks directly affects capital and money markets, as it regulates the supply of money and thus directly affects its value.

Economic attitude

Economic relations have a major impact on how investors perceive local markets. If a country has a strong trade relationship, investors consider this country to be economically stable with the possibility of increasing profits.

Situation in other markets

The situation in other markets is important when considering an investment decision as to where and when funds should be transferred between countries.When capital markets in one country move in the opposite direction of the trend, investors start to suffer losses, capital will move out of the country, and may also cause the local currency to devalue.

Situation / reports of the companies

One of the important factors affecting capital markets is the current economic conditions of individual companies. A company's positive economic situation may encourage investors to invest in its shares. A bad economic situation, in turn, forces investors to move their assets to other companies and/or eventually withdraw capital from this country.

Legal acts and taxes

Legal acts, local or international, can have medium-and long-term effects on capital markets. Legal acts can create barriers, or Vice versa – act as an impetus for foreign economic investment.

Weather conditions

Weather directly affects the prices of goods, which in turn affect companies that use these goods as raw materials. Rising commodity prices also increase the cost of products. This, in turn, depending on the type of enterprise and company, leads to lower profits and negatively affects the company's reporting. A worsening economic situation leads to a drop in stock prices, which in turn forces investors to withdraw capital from the company.

Political situation

Political situations or conditions have a significant impact on capital markets. When a country has a stable political situation (foreign or domestic – international policy), investors are comfortable investing in this country. On the other hand, in times of political instability, traders may respond by withdrawing funds from a given market or region.

Economic downturn

Economic downturns can have different sources. It can be financial (for example, a banking crisis), commodity-related (for example, an oil crisis), political, and so on. It is common that during a downturn, people tend to withdraw capital from the market in order to "save themselves from the worst moment." Therefore, the most exposed to risk are banking and financial sectors, tourism, automobile, etc.

Economic growth

The economic growth situation in a country or region is favorable for companies that sell their products to consumers in this area. Economic growth usually means that customers are more optimistic and are in a better economic position, so they can afford more, and are predisposed to make real purchases. The expected increase in profits of companies that sell more and more of their products can attract both local and foreign investors, who create demand, resulting in an increase in the price of the company's shares.

Confidence

The confidence indicator reflects the overall picture of how the country's residents perceive the prospects for the future. It is also one of the factors that Central banks take into consideration when forming their monetary policy. In General, high trust from customers means that they are more optimistic and willing to spend more on consumption, and as a result, companies will be able to sell more products and earn higher profits. Consequently, the attractive prospects of companies may attract investors, believing that the share price will grow in the future.

Events

One-time events can have a significant impact on capital markets. A good example is the organization of the Olympic games, which requires large investments in infrastructure to attract tourists to the region, and which provides a positive incentive for participating companies. On the other side of Libra, there are negative events, such as terrorist attacks. These are certainly rare cases, but soon after the September 11 terrorist attack in the United States, the main stock markets were closed due to severe consequences for the capital market. Events in a single company usually do not affect common markets, although there are exceptions. An example of such an exception is the Enron case, where more than 20,000 employees were dismissed due to allegations of financial fraud, after which ENRON went bankrupt. What is important is not the number of employees laid off, but the scale of the enterprise, being one of the main energy companies. Investors should carefully monitor events, because the consequences in the capital markets may not always be predictable.

Forecast of experts

Experts 'forecasts may meet or contradict investors' expectations. As a rule, they do not have a direct impact on capital markets, but the mood of market participants can be affected when "experts" represent national authorities – either political or monetary authorities. When monetary authorities make statements about the economy as a whole, they may give signals about future speeches or hints about the future of monetary policy. This, in turn, can affect the supply of money and the interest rate (the latter is the most interesting factor for foreign investors). Please consult an independent financial adviser if you have any doubts about the specification of market instruments and mechanisms.

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