The value of a country’s currency is affected and influenced by various economic indicators that reflect how a country is performing. The macroeconomic events that are placed internally and internationally are factors that have huge effects on the currency’s value. Forex traders should know that there are economic reports which have huge impact on the forex market.
GDP is considered for one of the biggest measures of a country’s economy and it represents the total market value of all goods produced in a country during a given year. Most of the traders are focused on the two reports that are issued in the months before the final GDP figures: the advance report and the preliminary report. As forex traders we need to be constantly on top of these data – always ready to read and interpret reports as they are released.
Inflation is one of the most important gauges for a currency trader to track. Inflation reports monitor the rise of prices of basic goods and services in an economy, inversely the rate at which purchasing power is falling. The main cause for a higher inflation rate is growth of money supply without an equal growth in the country’s assets. Forex traders should know that higher interest might attract investors looking for a big return on their currency holdings while a low interest rate currency might be sold for a better paying alternative.
PMI (Purchasing Managers Index) is an indicator of the economic health of the manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment. Service PMI’s are published monthly by Market Economics in conjunction with sponsors and are based on surveys of over 400 executives in private sector service
companies and usually have a big impact on the forex market.
The Retail Sales Report is one of the most watched indicators used in fundamental analysis. The number gives forex traders a good idea of the strength of the economy and it is used by economists and traders to determine overall purchasing trends among consumers. The closely watched data is released monthly, typically coming out two weeks after the end of the month reviewed at 8:30 am New York time
