In a recent announcement that affects foreign exchange Sydney, business confidence rose to a level higher than it has been in 3.5 years. If you already understand fundamental analysis you can comprehend why such a report might impact the forex market. For those who have yet to study fundamental analysis in depth, this example will serve as an explanation of news and its impact on the foreign exchange market. Business confidence reports have an impact, whether it is small or large. The determining factor is sometimes the report itself, but at other times it is a combination of various reports that make the most impact.
Foreign Exchange Sydney on Business Confidence Only
Business confidence basics state how confident business managers are in the economy. When managers are hiring more people and getting more inventory into their company it means business confidence is high. If business managers feel the economy is not secure they will hold off hiring, expansion, and inventory. Basically business spending will come to a stop or near standstill when businesses are not confident about economic projections.
The level of business confidence impacts trade flows, investment flows, currency value, and money supply. This is why there is a direct relationship to foreign exchange Sydney when business confidence reports hit the market. How do you think a new high for 3.5 years in Australia impacted the foreign exchange market?
The answer will be forthcoming, but first the basics of the relationship. With trade flows business confidence needs to be high in order for corporate spending to occur, since this also increases the import demand and therefore trade flows. It stands to reason when there is confidence then corporate spending is up along with profits and thus investment flows start to open up. Inflation and even interest rates will climb too. The money supply will become lower, but this helps to increase the currency value. For foreign exchange Sydney an increase in business confidence means an increase in the AUD.
Other Foreign Exchange Sydney Factors for Confidence
You have to realise that no “one” thing is going to impact the foreign exchange market. The current business confidence report is higher than it has been in years, which does lend more credence to the report’s impact. However, part of the confidence occurred because of the new elections. Key issues are going to be addressed according to the new government, which is supposed to help the economy. Building and taxes are two things that will be addressed. There was also be a change to 2.5 per cent benchmark rate in previous months which helps increase corporate spending. Add in good housing and manufacturing data and it makes it possible for foreign exchange Sydney to react in favour of the AUD. If you also look at the USA and its troubles then there is really no reason the AUD would not gain as it has in the last few months of 2013 and will continue to do for the rest of the year. The economy has better stability results in Australia.
Get a free Forex PDF PLUS:
- 14 Video Lessons
- Free One-on-One Training
- A 5000$ Training Account
- In-House Daily Analysis
- Get FULL ACCESS