Growth and prices, rates and jobs:fundamentals read the economy's knobs.
The study of economic indicators (GDP, inflation, employment), central bank policy, interest rates and geopolitical events to judge what a currency is worth.
It describes the forces behind a price and does not say when a price will move.
In plain words
Fundamental analysis studies the economic forces behind a price: growth, inflation, employment, interest rates, trade and politics. For a currency, it asks how one economy and its central bank compare with another’s. Technical analysis, by contrast, studies the price chart itself.
See it move
Currency value and Growth
Why it matters
Scheduled data releases and central bank decisions are the moments when fundamentals reach the market, and prices often move sharply around them. What usually matters is how a figure compares with what was expected, since expectations are already reflected in the price.
Worked example
An example only. The figures are round and invented for the arithmetic: they are not market prices.
Economists expect inflation of 3.0% and the published figure is 3.4% (invented figures).
- 1Expected3.0%
- 2Published3.4%
- 3Surprise = 3.4% − 3.0% = 0.4 percentage points higher
The surprise of 0.4 points is the new information; an analyst then asks what it implies for interest rates, and the market’s reaction is not certain.
A common mistake
A strong economic figure is often expected to lift the currency automatically. If the figure was already expected, or other factors outweigh it, the price may not move, or may move the other way.
Check yourself
Learn more
Educational information, not investment advice or a recommendation to trade.