Foreign Exchange Market Data

What Is Foreign Exchange Market Data?

Also referred to as the currency exchange, forex, and even fx, the foreign exchange market deals in world currencies exchanges. This data facilitates international trade and enables economists to judge the strength of a country’s economy; it also helps traders buy and sell currencies as they would buy and sell company stocks.

Foreign exchange market data also includes cryptocurrencies.

Where Does Foreign Exchange Market Data Come From?

The currencies market is decentralized, with data collected from many banks and independent trading hubs. There are also unofficial currency data sources, such as when two individuals exchange currencies on their own. However, generally only the most established and trustworthy trading hubs produce foreign exchange market data. One most common of these is the Bloomberg Generic Composite Rate: an aggregate of market participant quotes—not trades—updated every thirty minutes. Other currency market data providers offer real-time updated APIs of aggregated quotes; you can find reviews for them at our site.

What Types of Columns/Attributes Should I Expect When Working with This Data?

Data providers often divide foreign market data into world region (Europe, Africa, Asia-Pacific, etc.). Tables include columns of currency pairs, value, change rate, net change, and the time of the last update. Line graphs frequently accompany these tables.

This data always consists of currency pairs; no coin or bill has inherent value, so data providers always measure currencies in relation to another. When measuring the value or strength of a currency, economists focus more on the purchasing power of a currency (e.g., how much of a staple food item does a unit of the currency buy) whereas financial traders focus more on relational strength, usually comparing a currency to another stronger currency (often the US dollar, the UK pound, or one of the other top ten currencies.

What Is Foreign Exchange Market Data Used For?

While there are many independent speculators who seek to make money on the exchange of foreign currencies, companies are the primary users of this data: in an international, interconnected world, businesses rely on this data to optimize prices for their products and services to a customer’s local market (which is an aspect of product personalization) and to pay employees, contractors, and other businesses when the exchange rate is more favorable to them.

Companies can also use rising local currency estimations to attract investors.

Finally, economists use this data to measure countries’ economic state—and, therefore, to argue for policies to bolster or protect their currency.

How Should I Test the Quality of Foreign Exchange Market Data?

To test foreign exchange market data, make sure to use a large variety of trusted sources. Keep continuously updating feeds of quotes or trades or both and, most importantly, clean the aggregated data. Be especially wary of outliers.

Additionally, keep track of world news, especially politics, as these impact the strength of national currencies.

Interesting Case Studies and Blogs to Look Into

Bloomberg: Markets: Currencies
FCXM: Bitcoin vs Forex: Understanding The Differences

Tangible Examples of Impact

Asian shares advanced on Thursday as market euphoria over COVID-19 vaccines and expectations a Biden administration would deliver more economic stimulus and political predictability overrode a slate of weak U.S. economic data.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.39% while Japan’s Nikkei gained 0.91%.

Reuters: GLOBAL MARKETS-Asian shares advance as vaccine, recovery hopes triumph soft U.S. data