Economic impacts on the market of forex like in the stock trading, traders in the forex market are also based on two forms of analysis, technical analysis (analysis based on charts and indicators) and fundamental analysis (based on World Economic news). Technical analysis is used equally in stocks and forex, through graphic analysis and indicators. Fundamental analysis is slightly different – while companies have to analyse financial statements, countries have economic report strips and indicators to be analyzed.
To analyse the currency value of a particular country, it is necessary to evaluate the country's economic situation. In this section, we will look at some of the key economic data that helps traders learn the economic situation of a country.
A country's economic indicator is a detailed data report of the economic performance of a country in a particular region. These reports are usually published periodically by government agencies or private organisations. While there are many policies and factors that can affect the performance of a country, that is directly the measured factor included in this financial statement.
This report is published periodically, so changes in economic indicators can be compared to a certain time. Economic reports generally have the same effect on earnings reports or monthly reports for companies. In Forex, as in most markets, if the report deviates from what economists and analysts expect, it can cause a major movement in the price of the currency.
Here are some of the major economic data and indicators used for fundamental analysis in the forex market. You may have heard from some of these indicators, such as GDP, as it has an impact, a major effect on the equity market.
Gross domestic product (GDP)
GDP is regarded by many as a broad measure of the economic performance of a country. This is the total value of all goods and services that have been manufactured in a country at any given time. Most traders don't really focus on the final GDP data, but rather in two data issued a few months earlier, known as the initial report. This is because the final GDP figure is often regarded as a lagging indicator, which means they can confirm the trend but cannot predict the trend, which is useless for traders looking to identify opportunities. Compared to the stock market, the GDP report is somewhat similar to the income statement from public companies that are aware of the report's end year. Both give investors and traders a growth indication that occurs over a certain time.
The retail sales report is very closely followed which measures the total revenue, or the dollar value of all goods sold in retail stores in certain countries. The report estimates that the total goods sold, took the sample data from the national retailer. Because the consumer accounts for more than two-thirds of the economy, this report is very useful for traders to measure the direction of the economy. In addition, because to report data based on previous month's sales, it is timely, unlike GDP report which is a lagging indicator indicator. The contents of the retail sales report may cause volatility above normal in the market, and the data in the report can also be used to measure inflation pressures.
Consumer Price Index (CPI)
CPI is an economic indicator that measures the level of price change in the economy, and is a benchmark for measuring inflation. The use of basket of goods that is representative of goods and services in the economy, with the change in the price of the basket of CPI than year to year. This data you can make one of the most important economic indicators, and release can increase volatility in equity, fixed income and currency market. The implications of inflation can be key to movements in the currency market.
This is just a brief summary of some important data that you should consider as a new tarder. There are many other data and factors that can affect the currency exchange rate, Independent Investor.