Betfair Official Blog

Market Jargon Buster 2

This week, FX made even easier than just two letters...

FX markets exist wherever one currency is exchanged for another. Markets are open all day (except at weekends) and volumes are traditionally colossal.
Currency is traded by big banks, governments, global corporations and currency speculators.

Tradefair currently offer four currency exchanges to trade on.
EUR/GBP
EUR/USD
GBP/USD
USD/YEN

All markets are daily and close at 8pm.

The world's currency markets can be viewed as a huge melting pot: in a large and ever-changing mix of current events, supply and demand factors are constantly shifting, and the price of one currency in relation to another shifts accordingly. No other market encompasses (and distills) as much of what is going on in the world at any given time as foreign exchange.
So what should you look out for when trading currency?

- For the politicos amongst you, government policy can be analysed and used to predict how a currency will be faring in the future. Aside from obvious indicators (such as the Budget), any moves by central banks regarding Interest Rates will have a major impact on currency ups and downs
.
- Economic gurus may prefer to infer from the economy. Budget surpluses are always a positive; trade deficits probably the reverse. Inflation can work both ways - of course, the currency is worth less but the expectation of a rise in interest rates could boost it. Generally, the more healthy and robust a country's economy (as delineated by GDP reports, employment levels etc), the better its currency will perform, and the more demand for it there will be.

- Global events can also have an impact. Political instability or a change in leadership can dramatically affect economic confidence in a currency.

- Some people argue that there are fixed patterns, and use long-term graphs to monitor this activity.

Happy punting!