Why the Forex market is the most important in the world and how it affects you on a daily basis

Many people are not familiar with or may have never heard of Forex. However, Forex is part of the everyday decisions we make in our homes. If a product is going up in price or its availability is reduced in the market, it is because there may have been a change in the exchange rate that is making it difficult for importers to access the products easily. foreign exchangeForex is an abbreviation for Foreign Exchange and does not have a centralized location like the New York or London Stock Exchanges, but rather all transactions are carried out electronically around the world through financial institutions, central banks, corporations and governments. Forex is also greatly influenced by the operations carried out by individual traders.

How it works and why it is important

Forex operates 24 hours a day, five days a week. Individuals can access this market that trades 220 billion euros per hour and that makes it the place of choice for investors who bet on taking advantage of fluctuations in exchange rates (known in English as spread in Forex).

The Forex market plays a crucial role in the domestic economy of any country due to its influence on exchange rates and, consequently, on various economic areas.

As we have seen, exchange rates directly affect international trade. A favourable exchange rate can make a country’s exports more competitive in the global market, increasing sales and revenues for domestic companies. On the other hand, an unfavourable exchange rate can make imports more expensive, which can impact the prices of goods and services in the local market, affecting consumers.

But movements in the Forex market can also influence a country’s inflation. If a country’s currency depreciates, import costs increase, which can lead to higher prices for imported goods and services and, therefore, higher inflation. Conversely, a strong currency can help keep inflation low by reducing the cost of imports.

Central banks like the Bank of Mexico Central banks closely monitor the Forex market and use interventions in the currency market as a tool to implement monetary policy. By buying or selling their own currency on the Forex market, central banks can influence the exchange rate and, therefore, the domestic economy. But these operations must be carried out very carefully and with the need to correct long-term drawbacks, since an interventionist policy could lead to problems in inflation figures.

The influence of Forex in countries like Mexico that receive many remittances

Mexico is one of the largest recipients of remittances in the world thanks to the large number of citizens living abroad, especially in the United States. Remittances represent a significant source of income for many Mexican families and have a significant impact on the country’s economy.

Exchange rate fluctuations affect the value of remittances that Mexican families receive. A favorable exchange rate can increase the amount of pesos that families earn for each dollar sent from abroad. This can improve their purchasing power and, consequently, their quality of life.

Remittances also have a direct impact on local economies, especially in rural and less developed communities. The increase in purchasing power generated by a favorable exchange rate can help boost consumption and ultimately support many family businesses, especially in mass consumption sectors.

What type of sites should you choose for trading in Forex?

To operate in the Forex market, it is important to choose a suitable platform. In general, the most convenient ones are those that are supported by the local monetary authority and that meet all the established requirements. There is a wide variety of companies that offer this type of service and everything will depend on knowing the level of trust and accessibility to money.

The most important thing is that the platform is regulated by local and international authorities. For example, in Mexico, the National Banking and Securities Commission, also known as CNBV, is in charge of regulating these platforms. In the United Kingdom, this operation is handled by the FCA (Financial Conduct Authority), while in the United States, it is the CFTC.

These companies must comply with strict security standards that add an additional level of trust to the system. In addition to encrypting users’ personal and financial data, they must offer two-factor authentication systems to Protecting user accountsand have sufficient backup funds for all transactions.