The Galaxy is populated by a myriad of alien races that all have their own agendas and stances towards each other and you. They will pursue their own goals which in turn can affect the galactic tradescape. One faction may declare war on another and cause prices to spike in one region, or blockade the warp lanes in another causing you to either pay more in fees crossing their territory or make the market collapse entirely. The galaxy is alive with events that are summarized every 200 turns in the Galactic News Network summary to help you stay informed as to what's going on .
The Faction Embassy is located at every major Starbase on the map and allows you to interact diplomatically with all the factions in the game and improve relations. Relations can be improved by either completing missions for that faction, trading at their ports, clearing out pirates and rogues in their territory, random events, attacking their enemies or good old fashioned bribery. Conversely, your standings can be degraded by trading with their enemies, attacking their ships/colonies, purposely draining a faction region of any trade item and other actions... you'll just have to discover them!