Economic indicators influence currency values from "summary" of International Money and Finance by Michael Melvin
Economic indicators provide key insights into the health and performance of a country's economy. These indicators include data such as GDP growth, inflation rates, unemployment levels, and trade balances. Investors and traders closely monitor these indicators as they can have a significant impact on currency values. For example, if a country's GDP growth rate exceeds expectations, this can lead to an increase in confidence in the economy. As a result, foreign investors may be more inclined to invest in the country, leading to an increase in demand for the currency. This increased demand can cause the currency to appreciate in value relative to other currencies. Similarly, inflation rates play a crucial role in determining currency values. A high inflation rate can erode the purchasing power of a currency, leading to a depreciation in its value. ...
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