Forex Trading Economic Macro Indicators
Interest Rate Announcement
Interest rates play the most important role in moving currency prices in the forex market . As an institution that sets interest rates, the central bank is the most influential actor. Interest rates dictate the flow of investment. Because currencies are representations of a country’s economy, differences in interest rates affect the relative value of currencies in relation to one another. When central banks change interest rates, they make the forex market experience movement and volatility. In the world of forex trading, accurate speculation of the actions of the central bank can increase the chances of forex traders to make successful forex trading.
Gross Domestic Product (GDP)
GDP is the widest measure of a country’s economy, and this represents the total market value of all goods and services produced in a country during a given year. Because the GDP number itself is often considered a lagging indicator (the indicator that raises the signal after the price moves), most forex traders focus on two reports issued in the months before the final GDP figure: follow-up reports and initial reports. A significant revision between these reports can cause considerable volatility.
consumer price index
The Consumer Price Index (CPI) may be the most important inflation indicator. This index represents changes in retail price levels for basic consumer baskets. Inflation is directly tied to the purchasing power of domestic currencies and influences its position in the international market. If the economy develops under normal conditions, an increase in the CPI can cause an increase in the base interest rate. This, in turn, leads to an increase in the attractiveness of the currency.
Employment indicators reflect economic health or the overall business cycle. In order to understand how the economy functions, it is important to know how much work is created or destroyed, what percentage of the workforce is active, and how many new people claim to be unemployed. For measuring inflation, it is also important to monitor the speed of wage growth.
The retail sales indicator (retail) is released monthly and is important for forex traders because it shows the overall strength of consumer spending and the success of retail stores. This report is very useful because it is a timely indicator of a broad consumer spending pattern that is adjusted for seasonal variables. This indicator can be used to predict the performance of lagging indicators that are more important, and to assess the direction of the economy that will soon appear.
Balance of Payments
Balance of Payments (Balance of Payments) represent the ratio between the amount of payments received from abroad and the amount of payments abroad. In other words, this shows the total foreign trade operations, trade balance, and the balance between exports and imports, transfer payments. If payments that come out exceed payments to countries and other international organizations, then the balance of payments is positive. The surplus is a beneficial factor for the growth of the national currency.
Government Fiscal and Monetary Policy
Economic stabilization (for example, full employment opportunities, inflation control, and equitable balance of payments) is one of the objectives the government seeks to achieve through fiscal and monetary policy manipulation. Fiscal policy relates to taxes and expenditures, monetary policy relates to financial markets and the provision of credit, money and other financial assets.