Will the Fed raise interest rates? At what rate is GDP growing? Will the inflation rise? What about the labour market?

The answers to these and a number of other similar questions constitute fundamental analysis. Knowing the key factors that determine the market outlook – economic, political, commercial, etc., allows for the construction of a reasoned expectations for the financial markets.

In the most general sense, the value of a currency is the result of the laws of supply and demand. When a country is progressing at a high rate, has high productivity, creates jobs and is innovative, it is likely that there will be increased interest in investing in it, in its commodities, in domestic stocks and bonds. For the implementation of these operations, there will be an increased demand for the local currency, resulting in its appreciation.

The converse is also true – there is unlikely to be much demand for the currency of a lagging economy. Consequently, its value will fall.

Fundamental analysts monitor key macroeconomic indicators, monetary and fiscal policies as well as other socio-economic areas in order to determine the global, regional and local outlook.

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