Markets for Foreign Exchange and Global Equities

Did you notice that equity markets can also be used to predict currency movements？

In some ways, equity indexes can be seen as a form of FX crystal ball.

The stock (equity) market seems to be the most closely covered financial market, based on what you see on television, hear on the radio, and read in the newspaper.

It's important to know that in order to buy stocks from a specific country, you'll need the local currency first.

A European investor must first convert his euros (EUR) into Japanese yen before investing in Japanese stocks (JPY).

The value of the JPY appreciates as a result of the increasing demand for it. Selling euros, on the other hand, increases the provision of the currency, lowering its value.

International money floods in when the prognosis for a particular stock market is favorable.

When the stock market is faltering, on the other hand, international investors withdraw their capital and hunt for a better place to store their money.

Even if you don't trade stocks, you should keep an eye on the stock markets in key countries as a forex trader.

If the stock market in one country begins to outperform the stock market in another, you should expect money to flow from the weaker stock market to the stronger stock market.

This might cause the currency value of the country with the stronger stock market to appreciate, while the currency value of the country with the weaker stock market could devalue.

Here's the gist of it:

A robust stock market translates to a strong currency.

A poor stock market translates to a weak currency.

You could potentially make some money if you bought currency from a country with a better stock market and sold currency from a country with a weaker stock market.

Do you have a basic understanding of the key global equity indices？ It‘s your fortunate day! They’ve arrived!