Understanding fundamental analysis and the impact of economic indicators.
Open the economic calendar at fxpro.com and find major economic indicators with two or three exclamation marks. These are publications of statistical data that have the strongest influence on the currencies of the related countries.
Typically, traders pay attention to the difference between the actual value and the forecast. The more this difference the more volatility could occur on the price chart of a dependent asset. Most often, it is the national currency of that country the news is published.
More often, you will follow the US news (they are most understandable for beginners) and the focus of your attention will be on the dollar – USD. If the American statistics turns out to be good (better than analysts' forecasts), then get ready that the EURUSD chart can go down: yes, the dollar rate, in this case, will increase but pay attention that it stands second in the pair. Accordingly, the price of the euro in dollars will fall.
If it is easier for you to open clear deals, choose the USDJPY chart: the dollar is first there, and the Japan markets (JPY) are already closed by this time.
If the released data will affect the growth of the dollar value, the pair chart will grow up (the direct dependency).
Building permitsWhat is the essence: This report includes data on the total number of monthly building permits issued by the US government.
Why it should be followed: this indicator can give important clues about the future state of the economy. It makes this report a significant leading indicator for those traders who speculate on currency pairs with the US dollar.
When data is published: between the 17th and 18th of each month.
Consumer Confidence Index (CCI)What is the essence: CCI indicates how optimistic the population is with respect to the current and future economic situation. Consumers are sent a survey, related to their future purchases. The results make the CCI basis.
Why it should be followed: strong consumer confidence demonstrates that the standard of living is rising. That means people can afford to spend more. Moreover, it increases the national economy turnover, leads to national growth and empowers the national currency value.
When data is published: the last Tuesday of each month.
Consumer Price Index (CPI)What is the essence: This indicator shows how the cost of living has changed in a particular country: a number of consumer goods are being evaluated, including food and beverages, housing, transportation, and medical care. This data is often used to determine the inflation level.
Why it should be followed: This is one of the key lagging indicators. Based on this, traders can make predictions of potential interest rate changes and plan their trading accordingly.
When data is published: monthly.
Durable Goods OrdersWhat is the essence: The indicator measures the number of new resident orders for the production and supply of durable and large goods, such as engines.
Why it should be followed: This data demonstrates the rate of economic growth. The number of orders placed can give an idea of future factories workload. In turn, this affects directly both sales figures and employees' working hours.
When data is published: on the 20th of each month.
Labour Cost IndexWhat is it about: This indicator fixes the wage level changes, as well as bonuses and working benefits for all non-agricultural sectors. Data for the report is collected from an employers’ survey.
Why it should be followed: Labour cost index is related to the inflation figures. Employee remuneration is one of the main company expenses. The US Federal Reserve is also monitoring this index closely and, to a large extent, relies on it when choosing the direction of the national economic policy.
When is the data published: quarterly.
Gross Domestic Product (GDP)What is it about: this is a report that measures the total value of all goods and services produced in a country during a full year or a quarter. This publication can cause significant fluctuations in the exchange rate of the national currency. Gross Domestic Product is not only published in the United States but also in other countries (Canada, Great Britain, Japan, etc.)
Why it should be followed: this is a great opportunity to compare the economic growth rates of different countries and make a forecast on the chart movements of certain currency pairs.
Number of new foundation bookmarksWhat is it about: The report measures the number of houses that went under construction over the previous month.
Why it should be followed: the indicator is directly related to the rate of economic growth. E.g. the continuous reduction in the number of US construction projects may indicate an impending recession. At the same time, an increase in activity may indicate a positive period in the country's economy. The number of new foundation bookmarks also affects the dollar rate (USD).
When is the data published: around the 17th day of each month.
Changes in industrial productionWhat is the essence: Shows how much goods are produced in the country during the month. In general, in calculations are involved the financial results of industrial firms, factories, mining and energy companies.
Why it should be followed: considered as a coincident indicator. It means that any changes this report captures are happening in the economy right now. The publication indicates in which sectors growth is observed: accordingly, it is possible to determine the current trend in the national currency. The indicator, ahead of time, reflects the national employment level changes, average earnings, personal incomes and inflation figures.
When data is published: 11-12th of each month.