Do you trade in the forex market? You might be aware of exchange rates and its forecasting. Numerous factors are used to determine the exchange rate of one country’s currency on another country’s currency. In real, if the value of one currency is lower as compared to another, then its exports will be cheaper, and imports become costlier.

Previously, analysts have to determine exchange rates through economic theories. With the advancement in the technologies, forecasting software is used to get a technical analysis of the same. This saves much of the time and offers precise results of forecasting of any currency pair such as AUD/USD exchange rate forecast.

Factors that determine exchange rates include:

  1. Inflation Rate:

In general, if a country has lower inflation rates, then it exhibits a rise in its currency value. This suggests that its purchasing power gets increased in relation to another currency.

In this manner, if a country has higher inflation rates, then it exhibits a fall in its currency value. This suggests that its purchasing power gets reduced in relation to another currency.

  1. Interest Rate:

Suppose you want AUD interest rate forecast. In this case, by manipulating current interest rates, it exerts influence on inflation and changes in these values will alter the exchange rate. (Central Banks has the right to change interest rates as per economic strength of the country.)

  1. Public Debt:

Large-scale financial deficit stimulates country’s domestic economy. It is one of the worrisome situations if the government has to print money to pay these debts.

If the government takes another step through domestic means, then selling domestic items will lead to lowering their prices. This will be a significant risk to country’s debt and economic growth as well. This suggests that public debt is a vital factor in determining AUD/USD exchange rate forecast.

  1. Political Stability:

With the stability in political level, a country’s economic performance will be checked. If a country stays away from investments, then it will offer adverse effects. In this regard, the movement of capital is important for all stable countries to maintain proper growth and development.

In AUD/USD exchange rate forecast, the political stability of both countries will be checked along with the level of investments in different sectors within the country. The economic theory has offered several methods how to approach for the same.

  1. Currency Deficit:

It is also termed as a current-account deficit. The balance of trade should be maintained among trading partners along with the country’s trading opportunities. The goods, services and other essential parameters will show how the country is investing.

In this regard, currency deficit will be termed as difference between how much a country spends on foreign trade and how much it earns. With the clear understanding of deficit, it will be easy to determine AUD/USD exchange rate forecast.

Moreover, the forecasting software utilises historical data. This means it offers more accurate result within less time where economic theory’s method requires a lot of data, and it is time-consuming.


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