Economic Indicator (II)


The other 5 financial releases that have an enormous impact on the Forex market are: 

Inflation Rate

Inflation happens when the prices of goods and services are rising but the purchasing power is falling over a certain period. 

The inflation rate is calculated using the Consumer Price Index (CPI). CPI calculates the price difference of a representative basket of goods and services from time to time 

The inflation rate is directly proportional to the consumer price index, therefore the higher the index, the higher the inflation rate. 

Unemployment Rate

The unemployment rate is the percentage of unemployed workers in the total labor force. The total labor force includes all employed and unemployed people in the country that are able and willing to work. 

The methodology for calculating the unemployment rate often varies among countries as every country has a different definition of unemployment. Although the calculation method might be different, a low unemployment rate is usually presumed that the economy is expanding and flourishing. 

Aside from economic indicators such as GDP, inflation rate, the unemployment rate plays a crucial role in indicating the health of an economy, and its labor resources. It is one of the simplest ways to measure the health of an economy. 

FOMC Minutes

FOMC Minutes includes a discussion of the economic and financial related policies considered by the FOMC. It is the monetary policymaking body of the Federal Reserve System. 

While the Federal Reserve conducts monetary policy to achieve its macroeconomic objectives, FOMC usually conducts policy by adjusting the level of short-term interest rates in response to changes in the economic outlook. 

FOMC minutes are important in the Forex market because it provides a clear guide to the future of US interest rate policy. A full set of minutes for each FOMC is published three weeks after the conclusion of each regular meeting.

Producer Price Index

Producer Price Index, PPI is a group of indexes that measures the average movement in selling prices from time to time. It is different from the CPI as it’s calculation is viewed from the seller viewpoint. 

PPI is released on a monthly basis that includes the measurement of nearly 10,000 individual products and product groups. It is often seen as an advanced indicator of price changes throughout the economy and inflation. 

Consumer Spending

Consumer spending is the amount of money spent on consuming goods and services by individuals and households. The spending includes all the purchases of durable goods, nondurable goods, and services. 

Many economists believe that consumer spending is the most immediate determinant of an economy’s performance. It acts as the demand side of the ‘supply and demand’ chain while production is the supply. Therefore, even a small downturn in the consumer spending has the ability to damage the economy.

With all the profound economic indicators listed above, traders are encouraged to do their fundamental and technical analysis before going into the market. A little extra hard work can ensure your Forex trading journey to be smoother and further.