Macroeconomic fundamentals influence currency valuations from "summary" of International Money and Finance by Michael Melvin
Macroeconomic fundamentals play a significant role in determining the value of a country's currency in the foreign exchange market. Investors closely monitor key economic indicators such as GDP growth, inflation rates, interest rates, and trade balances to assess the overall health of an economy. Positive economic data, such as strong GDP growth or low inflation rates, can lead to an appreciation of a country's currency as it signals a robust and stable economy. On the other hand, negative economic indicators, such as high inflation or trade deficits, can lead to a depreciation of the currency as investors become wary of the economy's performance. Interest rates also play a crucial ro...
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