The Foreign exchange, also known as Forex trading is fast becoming popular for both speculators and investors in the UK market. Trading takes place 24/7 which makes the Forex markets some of the biggest and most liquid in the world. There’s huge leverage for both beginners and seasoned traders.
The Forex Market is for the knowledgeable
There are many enticing features about the Forex market. However, UK traders must understand that it’s vast, overly competitive, and complex. Many funds, trading organizations, and leading banks control the market and integrate new data into the price.
As a result, Forex traders have a difficult time understanding that they are trading with at any time. If you are considering venturing into the foreign exchange industry and trading effectively, you need to be well prepared.
Gather as much information as you can and carefully study the seven dominant currencies. Strive to understand a country’s economic statistics and the foundation of various economies, as well as the various factors that affect currencies.
Understanding the Australian Dollar
As of the year 2009, Australia was ranked number 13 worldwide GDP wise. The country came at number 50 population-wise and number 19 regarding the value of exports. The Australian dollar remains among the five frequently traded currencies in the Forex trading industry. It’s worth mentioning that the Australian dollar has been a lax currency since 1983.
You might be wondering why we are emphasizing on the Aussie dollar. It’s only because this pair will give you a decent level of volatility. And without picking a volatilities asset it’s really hard to make a consistent profit. If you chose to trade the market with a high-end broker like Saxo, you will realize the importance of dealing with the Aussie dollar. The elite traders in the United Kingdom often find this as the most important aspect of trading.
Popularity of the Australian Dollar
The popularity of the Australian dollar in the Forex industry is attributed to the 3 Gs. That is, geography, geology and government policy. Geography has made the country a preferred trading partner for various rapidly evolving Asian economies which have numerous resource demands.
Geology has given Australia numerous highly sought after natural resources such as gold, oil, iron ore, diamonds, agricultural products, coal, nickel, and uranium. Due to a stable government policy, Australia enjoys a stable economy, government, and high-interest rates.
Furthermore, the rule of law and a Western business approach has contributed to the continued evolution of the Forex market in the country.
Regulation of Dominant Trading Currencies
The central bank in the issuing country either regulates or overly influences all the key trading currencies in the world. In the case of the Australian dollar, the RBA (Reserve Bank of Australia) executes this task. The RBA is a conservative organization that hardly interferes in the Forex trading market.
What’s more, the RBA is one of the institutions that take inflation seriously. As a result, Australia is popularly known for being among some of the countries with the highest interest rates across the developed world.
These high rates, however, did little to avert the housing bubble that took place in Australia. Further, the RBA is also faced by the fluctuation of the asset cycle and its influence on Australia’s capital account and trade balance.
The Economy of the Australian Dollar
When it comes to GDP, Australia has the 13th biggest economy which places it below the world’s dominant currencies. The country stands out among the advanced countries as a result of its over-reliance on commodities.
Farming represents 12% of the country’s GDP while mining comes in at 5%. Since 1980, Australia has had a robust economic liberalization policy. Still, the country’s resource wealth has not had an extensively positive influence on the economy.
Australia has yet to establish a prosperous domestic manufacturing industry. Rather, the country is grappling with high foreign debt and a massive current account deficit.
Movers of the Australian Dollar
Economic models outlined to determine the appropriate Forex trading rates are often erroneous in comparison to real market rates. This is attributed to the fact that economic models are determined by economic volatility.
Traders incorporate a vast range of economic data in their trading determination and their theoretical outlooks can drive rates. This is the same way an investor’s pessimism and optimism can drive stocks either below or above their fundamental value.
While Australia is a wealthy country, it’s small and overly depends on mining and agricultural commodities. As a result of non-competitive costs and high-interest rates, Australian businesses find it hard to compete. Moreover, the country lacks sufficient manufacturing infrastructure. Even then, the chances are that the Australian dollar will continue trading under commodity prices.