In fundamental analysis, traders look at a country’s economic fundamentals to try to understand whether a currency is undervalued or overvalued. They also use the information to try to get a view on how its value is likely to move relative to another currency in future.
Fundamental analysis can be complex, involving the many elements of a country’s economic data that can indicate future trade and investment trends. It can be simplified by concentrating on a few major indicators.
Some of the most important factors that can affect a country’s economy – and its currency – include: retail sales, GDP, industrial production, CPI, inflation, purchasing managers index data, housing data and more.