What Drives the Forex Market?
The Forex market is driven by 2 things: macroeconomic factors and big players. Macroeconomics affects market sentiment to buy or sell currencies, while big players have a big influence because they trade currencies in large volumes.
The forex market is mainly driven by macroeconomic factors and big players.
Macroeconomic factors influence traders' decisions to buy or sell. For example, if a country's macroeconomics are going up, traders and investors tend to buy the currency and it could drive the price higher. But if the macroeconomic aspects of a country are going down, traders tend to sell the currency and prefer to buy currencies from other countries with better economic conditions.
On the other hand, big players drive the forex market by holding the largest transactions. Their trading volume makes up 80% of the whole forex market, so when they make a decision to buy or sell a certain currency, the price would go in their direction. Commercial banks and major financial institutions are some examples of forex big players.