Exchange Rates – The Foreign Exchange Market, an Introduction
It’s the largest market in the world and where exchange rates are fixed - the foreign exchange market.
Money makes the world go round
Money – They say it won't buy you love, that it won't make you happy, but that it certainly helps. The foreign exchange market is where money literally makes the world go round. Here, banks, currency speculators, major multinationals, governments and a whole host of financial industries trade on the foreign exchange market - profiteering and speculating on exchange rates.
Exchange rates fluctuate
It's estimated that over 1.9 trillion dollars a day are traded on the foreign exchange markets. What makes it so unique is it is ruled by market forces and exchange rates continually fluctuate. There are a variety of factors that impact on exchange rates. And the foreign exchange market has grown thanks to an increase in fund management assets, hedge funds and pension funds.
Exchange rates and traders
Like any market, there are different deals and bargains to be had. Currencies are bought wholesale by traders, but the majority of retail customers at banks usually pay more as the banks routinely mark up the price. The foreign exchange market is divided into levels of access, traders include:
Politics, economics and market psychology
Fluctuations in exchange rates are said to be caused by monetary flows and expectations of changes in monetary flows resulting from GDP growth, inflation, interest rates, government budgets and other economic and political conditions. Exchange rates and currency prices are the result of supply and demand and market forces, so exchange rates are ever-shifting in the bubbling cauldron of economics, political events and supply and demand. There are three factors then that contribute to fluctuating exchange rates:
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Political conditions – political conditions can impact heavily on exchange rates and currency markets. Upheaval or instability will impact on the economy.
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Economics – government policies, the budget, inflation, gross domestic product (GDP) etc all play a central part.
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Market psychology – long term trends, cycle analysts and safe havens all contribute to defining exchange rates. ‘Buy the rumour sell the fact' is a truism often applied to the foreign exchange market.
Foreign Currency Exchange Ltd is a commercial currency brokerage based in the UK. We help thousands of clients move hundreds of million pounds across the globe every day. From large businesses to private individuals who wish to send regular payments abroad, you can save money with us by getting better currency exchange rates than with your bank. The Foreign Currency Exchange buys currency at wholesale rates and can help you save money with our fast secure service. For more information contact us now, telephone +44 (0) 20 7989 0000 or email info@fcexchange.co.uk