2. Economic conditions include:

Government budget deficits or surpluses
The market usually reacts negatively to widening government budget deficits, and
positively to narrowing budget deficits. The impact is reflected in the value of a country's
currency.
Balance of trade levels and trends
The trade flow between countries illustrates the demand for goods and services,
which in turn indicates demand for a country's currency to conduct trade. Surpluses and deficits
in trade of goods and services reflect the competitiveness of a nation's economy. For example,
trade deficits may have a negative impact on a nation's currency.
Inflation levels and trends
Typically a currency will lose value if there is a high level of inflation in the
country or if inflation levels are perceived to be rising. This is because inflation erodes
purchasing power, thus demand, for that particular currency. However, a currency may sometimes
strengthen when inflation rises because of expectations that the central bank will raise
short-term interest rates to combat rising inflation.
Economic growth and health
Reports such as GDP, employment levels, retail sales, capacity utilization and others,
detail the levels of a country's economic growth and health. Generally, the more healthy and
robust a country's economy, the better its currency will perform, and the more demand for it
there will be.
Productivity of an economy
Increasing productivity in an economy should positively influence the value of its
currency. Its effects are more prominent if the increase is in the traded sector.