Economic indicators wield significant influence over Forex prices as they provide crucial insights into the health and performance of a country's economy. Traders closely monitor these indicators to make informed decisions about currency movements. For instance, interest rates play a pivotal role; a higher interest rate in a country can attract foreign capital seeking better returns, increasing demand for that currency and consequently driving up its value.

Similarly, inflation rates impact Forex prices as they reflect changes in purchasing power. Central banks often adjust interest rates to control inflation, affecting the currency's value. Gross Domestic Product (GDP) figures are another key indicator, representing the overall economic health. Strong GDP growth may boost confidence in a currency, while contraction can lead to depreciation.

Unemployment rates contribute to Forex volatility; lower unemployment often signals a robust economy, strengthening the associated currency. Trade balances, influenced by exports and imports, impact currency values. A trade surplus can appreciate a currency, while a deficit may lead to depreciation.

In essence, economic indicators serve as barometers for a nation's economic health, guiding Forex traders in predicting future currency movements. Understanding these indicators allows market participants to position themselves strategically, mitigating risks and capitalizing on potential opportunities in the dynamic world of foreign exchange.