How do economic policies impact the forex market?

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A deep dive into monetary and fiscal policies and how they shape the financial markets at large.

The Forex market - also known as foreign exchange - is the largest and most liquid market in the world, with trillions of US dollars being traded on a daily basis. Underpinned by currency interest rate fluctuations, it is also arguably more volatile than the stock market, given the multitude of economic and socio-political factors directly impacting it.

Similarly, the ECB’s 2015 Asset Purchase Programme 5 funnelled billions of Euros into the economy, stimulating consumer confidence while pressuring the single currency. Understanding the implications of fiscal policy As highlighted earlier, monetary and fiscal policies work together to regulate business activities and secure growth. Both government and central banks’ actions significantly impact the economy, inflation, and currency strength, reverberating across the financial markets.

 

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