What Moves Currencies?
While technical analysis studies charts, fundamental analysis studies the underlying economic forces that drive currency values. Interest rates, employment data, inflation, GDP growth, and central bank policies are the major movers. When the US economy strengthens relative to Europe, USD tends to strengthen against EUR.
You don’t need to be an economist to use fundamentals. Understanding four key concepts — interest rates, inflation, employment, and central bank signalling — gives you 80% of the picture. The economic calendar on forex.mobile tracks all major events.
Interest Rates: The King of Fundamentals
Interest rates are the single most powerful fundamental driver. When a central bank raises rates, its currency strengthens because higher rates attract foreign capital seeking better returns. When rates are cut, the currency weakens.
The Federal Reserve (USD), European Central Bank (EUR), Bank of England (GBP), and Bank of Japan (JPY) are the four central banks that move forex most. Rate decisions are scheduled events — check the economic calendar. Markets often move before the decision based on expectations, then react violently if the actual decision surprises.
The Big Reports: NFP, CPI, GDP
Non-Farm Payrolls (NFP): Released first Friday of every month (US). Reports how many jobs were added or lost. Strong NFP = strong USD. This is the single most volatile regular event in forex — EUR/USD can move 50-100 pips within minutes.
Consumer Price Index (CPI): Measures inflation. Rising CPI = central bank more likely to raise rates = currency strengthens. Falling CPI = rates may be cut = currency weakens. CPI releases regularly cause 30-50 pip moves.
Gross Domestic Product (GDP): Measures economic growth. Higher-than-expected GDP = bullish for the currency. Released quarterly. Less volatile than NFP or CPI but sets the longer-term trend.
Hawkish vs Dovish: Reading Central Bank Signals
Central bankers carefully choose their words to signal future policy. ‘Hawkish’ language (inflation concerns, economic strength, possible rate hikes) is bullish for the currency. ‘Dovish’ language (growth concerns, employment weakness, possible rate cuts) is bearish.
Watch for phrases like ‘remaining patient’ (dovish), ‘vigilant on inflation’ (hawkish), ‘data-dependent’ (neutral). The market parses every word from Fed Chair speeches, ECB press conferences, and BOJ statements. Learning to read these signals gives you a significant edge over purely technical traders.