Factors influencing stock market

Exchange rates are determined by factors, such as interest rates, confidence, current account on balance of payments, economic growth and relative inflation rates. If inflation in the UK is relatively lower than elsewhere, then UK exports will become more competitive and there will be an increase in demand for Pound Sterling to buy UK goods. Also foreign goods will be less competitive and so UK citizens will buy less imports.

If UK interest rates rise relative to elsewhere, it will become more attractive to deposit money in the UK.

You will get a better rate of return from saving in UK banks, Therefore demand for Sterling will rise. If speculators believe the sterling will rise in the future, they will demand more now to be able to make a profit. This increase in demand will cause the value to rise. Therefore movements in the exchange rate do not always reflect economic fundamentals, but are often driven by the sentiments of the financial markets.

For example, if markets see news which makes an interest rate increase more likely, the value of the pound will probably rise in anticipation. The fall in the value of the Pound post-Brexit was partly related to the concerns that UK would no longer attract as many capital flows outside the Single Currency. If British goods become more attractive and competitive this will also cause the value of the exchange rate to rise.

For example, if the UK has long-term improvements in labour market relations and higher productivity, good will become more internationally competitive and in long-run cause an appreciation kee stock traders daily the Pound.

This is a similar factor to low inflation. In andthe value of the Japanese Yen and Swiss Franc rose because markets were worried about all the other major economies — US and EU. Canadian stock market screener, despite low interest rates and low growth in Japan, the Yen kept appreciating.

In the mid s, the Pound fell to a low against the Dollar — this was mostly due to strength of Dollar, caused by rising interest rates in the US.

A deficit on the current account means that the value of imports of goods and services is greater than the value of exports.

But a country who struggles to attract enough capital inflows to finance a current account deficit, will see a depreciation in factors influencing stock market currency. Under factors influencing stock market circumstances, the value of government debt can influence the exchange rate.

If markets fear a government may default on its debt, then investors will sell their bonds causing a fall in the value of the exchange rate. For example, Iceland debt problems incaused a rapid fall in the value of the Icelandic currency. For example, if markets feared the US would default on its debt, foreign investors would sell their holdings of US bonds.

This would cause a fall in the value of the dollar. US dollar and debt. Some governments attempt to influence the value of their currency.

Rolling Stock Market by Type, Application, Region - | MarketsandMarkets

For example, China has sought to keep its currency undervalued to make Chinese exports more competitive. They can do this by buying US dollar assets which increases the value of the US dollar to Chinese Yuan. A recession may cause a depreciation in the exchange rate because during a recession interest rates usually fall. However, there is no hard and fast rule.

It depends on several factors. Impact of recession on currency. Large devaluation inoccurred when UK left Exchange Rate Mechanism.

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