Major economic events affecting forex fundamental analysis

As explained above, several factors play an important part in doing forex analysis. Let’s get familiar with some of the main factors that impact Forex price movements.

Gross Domestic Product (GDP)

The GDP report of a country is its most important economic indicator. It provides the biggest measure of that country’s economic status. Released at 8:30 am EST on the last working day of each quarter, it exhibits the impact of how all financial activities have affected the market during that quarter. It’s an important factor to consider while doing forex technical analysis.

The GDP index is perhaps the most important factor to consider while doing a forex fundamental analysis since it can significantly impact all other forex technical analysis factors.

Trade Balance

It measures the difference between the imports and exports of all tangible goods and services of a country. It is an important factor affecting the GDP and it reflects a country’s economic strength. Ideally, the total number of exports ought to surpass the imports so the net difference of exports versus imports remains on the positive side, with more capital coming into the economy rather than going out of it. The trade balance reflects the overall health of the manufacturing sector.

Consumer Price Index (CPI)

A CPI report is used to measure the inflation rate. It is released at 8:30 AM EST on the 15th of each month. It reflects the previous month’s data and displays the changes occurring in various consumer goods categories and services, from one month to the next. It is one of the factors considered in forex technical analysis as a good CPI index is indicative of a growing economy and strengthening the currency.

The Producer Price Index (PPI)

While the CPI explains which market sectors are currently growing, the PPI measures the price at which commodities and goods are sold in the market, at a wholesale-rate level. It fundamentally indicates how much consumers have to pay while buying goods in the markets. A combination of a low PPI rate and a climbing CPI rate indicates a growing economy which means the currency is becoming stronger in the forex markets and it’s safe to trade in that currency.

Employment Indicators

Usually, the employment announcement takes place on the first Friday of each month at 8:30 AM EST. It states and explains the unemployment rate and the current employment status of the masses i.e. the percentage of unemployed people, the total number of new jobs created in the previous month and the average number of hours worked by the employees.

This report can enhance market movements and is an important factor in carrying out forex technical analysis.

The Non-Farm Employment report or the “NFP” can greatly swing the forex markets.

Durable Goods Orders

The durable goods orders report concerns how much people are spending on long-term purchases, and for products expected to last for more than three years. Released at 8:30 AM EST on the 26th each month, it offers insights into the future of the manufacturing industry and how manufacturing operations are likely to grow over time.

Retail Sales Index

It explains the movement of retails goods and indicates how the retail industry is growing. The report samples a set of retail stores across the country and states the number of goods sold through large store-chains to individually operating small local stores. It is released at 8:30 AM EST on the 12th of each month.

Housing Data

The housing data report shows how the housing market has grown in the previous month. It basically states the number of new homes built during the month and the total number of homes sold. The residential construction activity is indicative of how the economic stimulus is performing in a country. It directly reflects the people’s sentiment regarding how long they intend to stay in a particular region. In many ways, it helps to identify which regions are growing and which are losing out their economy.

Interest Rates

They function as main drivers within the forex markets. The factors explained above are very closely watched by the Federal Open Market Committee to measure the overall economic health of the country. The Federal government uses various instruments and tools at its disposal to increase or decrease the interest rates, or leave them unchanged, to govern economic health.