Just as markets or political conditions affect the price of stocks and bonds, so too are the valuations of currencies traded on the foreign exchange. Cash Forex Bull If a nation's central bank cuts its interest rate in response to an economic event such as inflation, the ripple effect is felt throughout the foreign exchange markets. Currencies are traded to match or support an interest rate change, especially if the interest rate hike or cut originates in a country with an influential currency such as the U.S. dollar. Other factors that affect the foreign exchange trading are political events, market conditions; the political climate in a region of the world can also create a ripple effect in the foreign exchange markets. Political turmoil in a country can generate a massive move by market participants away from that country's currency, and a destabilization in the currency's value can occur. Likewise, a return to peace or order in a region can act as a stabi