Know how to invest in Forex while inflation stay with Barry Sendach
Last year, when Eurozone was under threat of rising inflation, due to geo-political issues and the isolation from community countries. Most of the Forex investors in Europe had to digest a consistent loss overtime, why? The answer is simple, Inflation affects the currency rates directly. More is the inflation, lesser will be its currency value(purchasing power) and vice versa and so does to Forex, which is an economical measure for currencies exchange. The country has to import more and export less leading to financial crisis.
I am referring this because it’s not only the nation’s organization which will suffer losses, but every small or big investor like us. So, to avoid getting under the burden of debt, banks give higher interest rates. But what will every common investor or broker do. In order to decide the plan action. Let’s grasp an idea from Barry Sendach about the causes of inflation:
Demand-pull : Suppose, in an economy, price of a certain commodity rises due to more demand than supply. This is a usual behavior of growing economies and so the risk factor is normally monitored by forex investors.
Cost-pull: When you have to pay more for your business, you have to compensate that by increasing profit margins for every good you sell, which leads to price increase.
These factors can be tackled as they never exceed from the expected analysis in accord to a strong economic growth. But, what if the factors are not controlled by you but by the nation you are trading with.
For instance OIL, there are so many other end products whose sales and prices depends on the availability of crude oil. Infact in 2008, when USD price for a barrel touched 150$, purchasing power of most of the European and west nation currencies got reduced. This is known as hyperinflation and is a rare case in global economy.
That’s why, depicting global trends and trading in global market is considered precious to get an idea how and when the inflation factor will have considerable effect. There are 2 roles, inflation play into a national economy:
1) The bullish nature of inflation in a strong economic environment will give you good profits, More money involved, means more profits. .
2) If the economic growth isn’t stable, the inflation will hurt the investors and so the nation’s economy and currency power will drop, which ultimately affect FOREX.
Keeping these factors and trends in mind, you may need guidance from a novice broker or investor to keep up with dynamics of market as rhythmic automation tools are not a trustable asset in this fluctuating FOREX trend. Good brokers like Barry Sendach can give you certain tips & tricks to find the right timings and amount to put in your investment. Keep yourself updated, invest wisely!!