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Home  >  Fundamental analysis  >  Forex Macroeconomic indicators


Forex Macroeconomic indicators



Parts of this topic:

An economic indicator is simply any economic statistic, such as the unemployment rate, GDP, or the inflation rate, which indicate how well the economy is doing and how well the economy is going to do in the future.

Economic (business) indicators allow analysis of current and predicted economic performances. Economic indicators include various indices, earnings reports, and economic summaries, such as unemployment, housing starts, Consumer Price Index (a measure for inflation), industrial production, bankruptcies, Gross Domestic Product, retail sales, stock market prices, money supply changes, etc.

Economic indicators are reports released by the government or a private organization that detail a country's economic performance. Economic reports are the means by which a country's economic health is directly measured, but do remember that a great deal of factors and policies will affect a nation's economic performance.

These reports are released at scheduled times, providing the market with an indication of whether a nation's economy has improved or declined. The effects of these reports are comparable to how earnings reports, SEC filings and other releases may affect securities. In forex, as in the stock market, any deviation from the norm can cause large price and volume movements.

You may recognize some of these economic reports, such as the unemployment numbers, which are well publicized. Others, like housing stats, receive little coverage. However, each indicator serves a particular purpose, and can be useful.

These are the most important economic indicators for any country:

  1. Interest rate decision
  2. Retail sales
  3. Inflation (consumer price or producer price)
  4. Unemployment
  5. Industrial production
  6. Business sentiment surveys
  7. Consumer confidence surveys
  8. Trade balance
  9. Manufacturing sector surveys

Depending on the current state of the economy, the relative importance of these releases may change. For example, unemployment may be more important this month than trade or interest rate decisions. Therefore, it is important to keep on top of what the market is focusing on at the moment.

Various indicators are released by government and academic sources. They are reliable measures of economic health and are followed by all sectors of the investment market. Indicators are usually released on a monthly basis but some are released weekly.

Two of the most important fundamental indicators are interest rates and international trade. Other indicators include the Consumer Price Index (CPI), Durable Goods Orders, Producer Price Index (PPI), Purchasing Manager's Index (PMI), and retail sales.

There are 28 major indicators used in the United States. Indicators have strong effects on financial markets so FOREX traders should be aware of them when preparing strategies. Up-to-date information is available on many websites and many FOREX brokers supply this information as part of their trading service.

Most economic indicators can be divided into leading and lagging indicators.

Leading indicators are economic factors that change before the economy starts to follow a particular pattern or trend. Leading indicators are used to predict changes in the economy.

The leading indicators consist of the following economic indicators:

  • average workweek of production workers in manufacturing;
  • average weekly claims for state unemployment;
  • new orders for consumer goods and materials;
  • vendor performance contracts and orders for plant and equipment;
  • new building permits issued;
  • change in manufacturers' unfilled ;
  • durable goods;
  • change in sensitive materials prices.

Lagging Indicators are economic factors that change after the economy has already begun to follow a particular pattern or trend.

That is, economic indicators are useful tools that allow you to assess the overall strength and likely direction of the economy. These indicators can also have a significant impact on financial markets, and it is important for you as a trader to understand and monitor them. Here is a brief description of some of the more important and widely used economic indicators. These are a few that I follow closely, but there are many others. While these indicators tend to have the most direct impact on the financial futures markets, they are important to watch for their economic implications, no matter what markets you trade.

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