Fundamental Analysis in Forex Trading: How News and Events Move Currencies

When it comes to Forex trading, there are two main approaches traders use to analyze the market: technical analysis and fundamental analysis. While technical analysis focuses on chart patterns and price action, fundamental analysis digs deep into the economic, political, and social factors that influence the value of currencies. For traders who want to understand why the market is moving in a certain direction, fundamental analysis is essential.

In this article, we’ll break down what fundamental analysis is, how different news and events move the Forex market, and where you can monitor these updates. We’ll also share how you can start learning Forex for free at Mikofx Academy.

Fundamental analysis is the study of economic data, political developments, and global events to determine the intrinsic value of a currency. Every country’s economy impacts its currency, and by analyzing reports, news, and events, traders can predict whether a currency will strengthen or weaken.

For example:

If the U.S. Federal Reserve raises interest rates, the U.S. dollar (USD) often becomes stronger because higher rates attract foreign investment.
Conversely, if a country is facing political instability or conflict, its currency often weakens because investors lose confidence in the economy.

Fundamental analysis answers the question: “What external factors are moving the market?”

Types of News and Events That Move the Forex Market

Currencies react strongly to global events and economic reports. Below are some of the most important ones every trader must monitor:

1. Economic Indicators

Economic data is one of the most powerful drivers of currency prices. Key reports include:

Gross Domestic Product (GDP): Measures the economic health of a country. A higher GDP growth rate often strengthens a nation’s currency.
Inflation Data (CPI & PPI): Inflation rates influence central bank decisions. Higher inflation may push central banks to raise interest rates, boosting the currency.
Employment Reports (NFP in the U.S.): The Non-Farm Payroll (NFP) report is one of the most anticipated Forex events. A strong jobs report strengthens the USD, while a weak one weakens it.
Retail Sales & Consumer Confidence: Reflect consumer activity and confidence in the economy, which in turn affects currency strength.

Example:
If U.S. Non-Farm Payroll data comes out stronger than expected, the USD will likely rise against other currencies such as EUR or JPY.

2. Central Bank Decisions

Central banks play a huge role in currency movement by setting interest rates and controlling monetary policy.

Raising interest rates → strengthens currency.
Cutting interest rates → weakens currency.
Quantitative easing (QE) → usually weakens the currency due to increased money supply.

Example:
When the European Central Bank (ECB) cuts rates, the Euro (EUR) often weakens against major currencies like USD and GBP.

3. Political Events

Political stability or instability directly affects currencies.

Elections: Can create uncertainty, causing volatility.
Geopolitical tensions (wars, sanctions): Often lead to risk aversion, where traders move money into “safe haven” currencies like the USD, CHF (Swiss Franc), or JPY (Japanese Yen).
Government policies: Fiscal policies, trade deals, and regulations can impact investor confidence in a currency.

Example:
During Brexit negotiations, the British Pound (GBP) saw massive swings because of uncertainty surrounding the UK’s economic future.

4. Natural Disasters and Global Events

Events like pandemics, earthquakes, or global crises can also move currencies because they disrupt economies.

The COVID-19 pandemic initially weakened many currencies but boosted demand for the USD as investors sought a safe haven.

5. Market Sentiment and Risk Appetite

Not all movements are tied to hard data. Sometimes, traders react to overall market sentiment.

In times of uncertainty, investors move into safe-haven currencies.
In times of optimism, investors move toward riskier currencies (emerging markets).

Example:
If global investors are optimistic about economic growth, currencies like AUD (Australian Dollar) and NZD (New Zealand Dollar) may strengthen because they are considered “risk-on” currencies.

How to Monitor News and Events

To succeed in fundamental analysis, traders must keep track of global news and economic calendars. One of the most reliable platforms is Forex Factory, which provides an updated economic calendar with important announcements, forecasts, and previous results.

On Forex Factory, you can filter events by importance and see which currency pairs are likely to be affected. For example, a U.S. Non-Farm Payroll release will be highlighted in red as a “high impact” event.

Learn Forex for Free at Mikofx Academy

Fundamental analysis can seem overwhelming at first, but with the right guidance, any trader can master it. That’s why we recommend Mikofx Academy the best website to learn Forex for free.

At Mikofx Academy, you’ll learn:

How to analyze fundamental news step by step.
How to combine fundamental and technical analysis.
How to develop a trading strategy that fits your lifestyle.
Practical examples to help you grow as a trader.

Whether you are a complete beginner or an intermediate trader, Mikofx Academy provides resources to take your trading to the next level without spending a dime.

In Summary

Fundamental analysis is the backbone of understanding currency movements. By paying attention to economic indicators, central bank decisions, political events, and market sentiment, traders can anticipate big moves in the Forex market.

The key is to always stay updated with reliable news sources like Forex Factory and to continuously improve your knowledge through trusted platforms like Mikofx Academy.

Remember, in Forex, knowledge is power and the better you understand “why” behind market moves, the better your chances of success.