1.

Global growth is important because it influences the flow of

money around the world. Global growth is a major driver of many
currencies. When global growth is strong, exporters like China,
Korea, and Brazil tend to do well and when global growth is weak,
money tends to flow into safe haven currencies such as JPY and
CHF (and often the USD).
2. Commodity prices and terms of trade exert a very strong influence
on some currencies. Commodities are usually driven by global
growth but they also move based on other factors such as climate,
supply/production, idiosyncratic demand factors, and the popularity
of commodities as an asset class.
Commodity exporters such as Brazil, Canada, and Australia
benefit from commodity price strength while importers like Turkey
and India are hurt by high commodity prices. Certain countries are
known for exporting specific commodities and those commodities
tend to influence those currencies more than others. The more a
country exports a specific commodity, the more the price of that
commodity will influence the currency.
3. Fluctuations in global risk appetite and risk aversion often cause
FX moves regardless of the underlying domestic fundamentals of
individual countries. As you learned earlier, different currencies
have different personalities and certain currencies are safe havens.
When markets are nervous, traders generally flock to low-yielding
safe haven currencies like the JPY and CHF. This was on full display
in 2008 when the CHF and JPY (and USD, which was a low-yielder
at the time) exploded higher in response to the global financial
crisis.
4. Geopolitics can influence global risk appetite and can also trigger
specific currency moves in affected countries. Instability in Russia
will drive selling of RUB, PLN, and TRY, for example, as the market
reduces regional risk in an attempt to avoid losses. War, elections,
or major policy changes in regions or individual countries can all be
sources of geopolitical volatility.
These are the four main global factors that move currencies. Now
let�s look at domestic drivers of FX rates. As you gain more trading
experience, you will notice that the market oscillates back and forth,
sometimes focusing mostly on domestic conditions and other times
focusing mostly (or only) on global factors.
In times of high-risk aversion or intense focus on China, for
example, domestic drivers can become totally irrelevant. On the
other hand, when the world is stable, changes in local economies
and domestic interest rate policy can be the dominant driver of
currencies, to the complete exclusion of global factors.