Key Factors Determining Forex Currency Prices Foreign exchange (forex) markets form a vast global network where currencies are traded around the clock. With over $7.5 trillion traded per day in 2022 amid heightened volatility, exchange rates are constantly in flux. For short-term day traders and business scholars alike, understanding what drives these fluctuations is crucial. Currency values are influenced by a mix of macroeconomic fundamentals, market sentiment, and geopolitical events. While forex markets are complex and often unpredictable, several key factors play a prominent role in determining currency prices. Macroeconomic Fundamentals: Interest Rates, Inflation, and Growth At the core of currency valuation are a nation’s macroeconomic indicators. Interest rates set by central banks are among the most influential drivers. The difference in interest rates between countries (the interest rate differential ) is a fundamental driver of exchange rates. Higher i...