5 Economic Indicators to Follow as a Forex Trader
All economic indicator releases are compiled in Economic calendar
There are many economic indicators, so it is normal that if you are a novice trader you do not know which events are most important or where to find them.
For this reason we have chosen the most significant events you should follow as a Forex trader to predict the behavior of the currency pairs traded.
NFP - NonFarm Payrolls
NFP or Nonfarm Payrolls is an economic indicator that shows the change in the number of people employed in the United States during a previous month, but excludes the agricultural industry. The indicator is highly important as it provides clues about consumer spending, which accounts for most of the overall economic activity. Higher NFP signals healthier and more robust economic growth. Lower NFP points to a weaker economy. As a result, the US dollar falls. It launches on the first Friday of each month and causes major movements in the Forex market as the USD is part of many popular currency pairs.
If the actual value of payrolls is as expected, the movement of the dollar will depend on additional data such as unemployment rate and average hourly wage. The latter is an inflation measure and has a major impact on US central bank policy, so its role is becoming increasingly important.
GDP - Gross Domestic Product (GDP)
GDP or GDP (Gross Domestic Product) can be considered the most important indicator of a country's economic health and the broadest measure of economic activity.
It is worth noting that in many advanced economies there are three versions of the GDP release - advanced, preliminary and final. An advanced GDP moves the market more.
Any increase in GDP growth leads to an increase in the currency exchange rate. Vice versa, if GDP data is weaker than expected, the value of the currency will fall.
CPI - Consumer Price Index (IPC)
The CPI (CPI) represents the average prices paid by consumers for a basket of market goods. As a result, changes in this index identify periods of inflation and deflation. In addition, the data shows how effective the government's economic policy is. There are two types of CPI: CPI and Core CPI (excluding volatile energy and food prices) which are published at the same time. Traders pay more attention to CPI data.
The interest rate of a central bank depends on economic growth and inflation. That's why central banks pay close attention to CPI launches.. If CPI growth is close to a country's inflation target or higher, a central bank will likely raise its rate and the currency will increase as well. If the opposite happens, the currency will be depreciated.
Retail Sales - (Retail / Retail Sales)
One of the most important indicators available to forex traders is the report of Retail Sales. This report measures the total value of sales in the retail sector.
Retail consumption accounts for most of a country's GDP, and sales provide valuable information on consumption. High retail value also leads to higher corporate profits, which in turn can lead to more investment and the appreciation of the national currency.
A country's unemployment rate is crucial for markets given its importance to central banks as an indicator of the health of an economy.. Increasing employment leads to interest rate hikes as central banks aim to balance inflation with growth, and as such this attracts a lot of market attention from traders.
You should also pay close attention to Central Bank Meetings, which is not only important because banks disclose interest ratesbut also because give clues as to the future of monetary policy.
Of particular importance is the FOMC meeting (America's Federal Open Market Committee) because as you know USD is the world reserve currency and the currency whose fluctuations most influence the world economy.