Forex trading – key market indicators

Forex trading – key market indicators

Gross Domestic Product (GDP)

  • influential economic indicator
  • measures the total value of all goods and services produced by a country
  • an increase in GDP indicates a growing economy

Consumer Price Index (CPI)

  • measures the cost to buy a defined basket of goods and services
  • swap free forex account
  • measures changes in consumer buying power and inflation

Employment Reports

  • employment levels impact consumer spending habits and thus demand for a currency

Interest Rates

  • Central Banks maintain a “benchmark” interest rate
  • the Central Bank can increase rates during periods of high growth and lower interest rates during periods of low growth
  • investors and traders seek out currencies offering high returns – the demand causes the currency to appreciate
  • the greater the interest rate differential between two currencies, the greater the profit potential of a carry trade strategy

Institute of Supply Management (ISM)

  • inflation indicator
  • predicts manufacturing activity for the upcoming period
  • provides insight into the expected level of consumer demand for goods
  • index based on 50: value < 50 means that manufacturing has contracted from the previous period

Retail Sales Report

  • tracks consumer spending patterns
  • an increase is likely a positive for the currency

Trade Balance

  • value of imports vs value of exports for a country
  • a negative value indicates that more goods were imported (a trade deficit)
  • depending on the trade balance, the demand for a country’s currency differs

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