Inflation is an increase in the price of a basket of goods and services that is representative of the economy as a whole. Inflation has long been a serious enemy to economic growth and the world’s central banks constantly try to keep inflation in check by adjusting monetary policy. Inflation can influence currency exchange rates considerably and perception on inflationary trends is one of the basic items affecting central bank monetary policy.
The European Central Bank is in a policy no man's land, bombarded by news of a stagnating euro zone economy but hesitant to move forward with new stimulus until measures it loaded in June have ignited.
Trading the forex market is very risky and brings the possibility of losing money anytime you enter a trade. Anyone serious about trading would do well to incorporate money management techniques to their trading to protect their portfolio. Nearly all successful traders use a money management strategy along with their regular trading plan and if you have ever experienced a severe drawdown on your account you probably do too.
One of the most important factors for any economy is the Gross Domestic Product - GDP. In its essence, it reflects the economic situation of the state as a whole and has an impact on the value of national currencies, monetary policy, the price of shares in companies and stock indices.
One of the ways to protect your account when trading forex is to use the hedging trading technic. A transaction implemented by a forex trader to protect an existing or anticipated position from an unwanted move in exchange rates is called a forex hedge. Think of a hedge as getting insurance on your trade. Hedging is a way to reduce the amount of loss you would incur if something unexpected happened.