Currency prices reflect a balance between supply and demand. The two main factors influencing supply and demand are the key interest rate, on the one hand, and the general strength or weakness of the economy on the other. In addition, economic indicators, such as gross domestic product, trade balance and foreign direct investment, provide indications of the general health of an economy and thus affect the basic price movement driven by supply and demand. Massive amounts of data are released at regular intervals. Some of these data are more important than others. Data that reference key interest rates and international trade should be given the most urgent attention.

If opinions are divided on general expectations regarding changes to key interest rates, even the most insignificant piece of news released on the subject can influence financial markets. 
Usually, when a country raises its key interest rate, its currency is strengthened relative to other national currencies, since both the number of investors and the volume of investments increases because investors expect better returns. Raising the key interest rate, however, does not bode well for stock markets in the country where rates are raised. Some investors pull their investments out of the stock markets, as the higher interest rates can have a negative impact on company balance sheets, which results in lower capitalisation for many companies. That, in turn, can also weaken the value of the national currency. It is very difficult to forecast beforehand which of the two effects will dominate. In general, a consensus forms ahead of time as to the impact of a potential change in the interest rate. Indicators which have proven to have the greatest influence on changes in the key interest rates are the Producer Price Index (PPI) along with the Consumer Price Index (CPI) and the Gross Domestic Product (GDP). In general, the market senses when a change to a key interest rate is coming. Announcements about interest rate changes are made following meetings of the ECB, Fed, BOE, BOJ and other central banks.

Trade balance indicates the net difference between imports and exports in a country, which is why it is also called the foreign trade balance. If a country imports more than it exports, the trade balance will be in deficit, which is generally seen as negative. For example, when US consumers buy Japanese cars, US dollars are exchanged for Japanese yen, since imported Japanese goods are paid in yen. This cash flowing out of the US into Japan results in a decrease in the value of the US dollar and a simultaneous increase in the value of the Japanese yen. If, however, trade data indicate that the US is increasing exports, this bolsters trust in the American economy, since money is flowing into the US. This, in turn, will increase the value of the US dollar. From the perspective of the national economy, a deficit is not necessarily a bad thing. But when deficits exceed market expectations, a chain reaction is set off, causing negative price trends.