Learn Fundamental Analysis 7

Continues a series of publications devoted to the study of fundamental analysis of the international currency market (FOREX).

In the previous issue, we examined the relationship between public deficits and exchange rate changes using a simple model describing the mechanism of exchange rate changes in long and medium term.

Today we will examine the relationship of international trade and exchange rate changes, using all the same simple model.

International trade and currency

There is widespread opinion that the trade surplus - it was good, and the negative - a bad thing. Also often considered necessary to support domestic producers who can not withstand the competition from cheaper imported goods, as well as be promoted exit of domestic producers to international markets, and winning them a leading position.

The ultimate goal of government policy in relation to these processes is not an impact on exchange rates in order to achieve their specified levels. It is assumed that all such activities must lead to an increase in the welfare of the subjects of the national economy as a whole. Changes in exchange rates may also serve as a tool of this policy, and just be a byproduct of its effect.

However, understanding these macroeconomic processes, properly identifying the main trends in foreign exchange rates, with information, foreign trade policy which tends to hold the government of a country.