Forex Statistics
Working with Statistics - Forex
It’s important to know and study the elements that influence the economy of the currency market. The fundamental analysis means to help in the prediction of economical trends and price actions by analyzing economic indicators, government policies, and other factors within a business cycle framework. The analysis can be very good and effective at forecasting economic conditions, but it’s impossible to forecast exact price markets, as these models use current and historical empirical data to estimate future prices and translate those into specific trades.
Here are some of the most important economic indicators that are vital for predicting and making decisions in the forex market:
Trade Balance
The trade balance of a country is the difference in the value of its imports and exports. The export data can give an important reflection of the country’s growth, while imports provide an indication of domestic demand, but this figure is late relative to other consumption indicators.
For the US, the organization in charge of releasing this information is The Census Bureau and the Bureau of Economic Analysis of the Department of Commerce, and the information (data for 2 months prior) is released at 8:30 ET around the 20th of the month.
The Trade Balance release influences GDP forecasts. Net exports are a relatively volatile component of GDP. Trade Balance gives an early indication of the net export performance each quarter. Usually, the trends observed in export activities are an indicator of how competitive is the country’s position, and of the strength of economic activity abroad.
Gross domestic product
The Gross Domestic Product (GDP) is a measure that represents the total market value of all final products (goods and services), that have been produced in a country in a given year. It’s an indicator often related with the economic well-being of a country.
The GDP reflects how fast a country’s economy is growing, and, although it’s presented annually, monthly statistics are also available. The GDP numbers come from two sources: the Current Dollar GDP (the market value of goods/services that are produced), and the Constant GDP (which converts the current inflation into a standard era). Constant GDP is the one that measures the real economic growth.
When the GDP is up, the bond markets is down, and the stock market and the currency are up as well. When a country has a low GDP measure, the bond markets tend to increase and the stocks and currencies decrease.
Consumer Price Index
The Consumer Price Index (CPI) measures the price level of a fixed basket of goods and services purchased at an urban consumer level, which tends to be at least 80% of the population in the major currency countries. The CPI reports price changes in over 200 categories, and includes several user fees and taxes directly associated with specific goods and services, and its prices.
CPI is basically an inflation indicator, measured monthly in the US by the Bureau of Labor statistics, U.S. Department of Labor. When the CPI is up, bond markets and stock markets tend to be down. It also is a good indicator of short term interest rates and allows to speculate about the economic future of a country.
Producer Price Index
The Producer Price Index, most commonly known as PPI, measures average changes in selling prices received by domestic producers in the manufacturing, mining, agriculture, and electric utility industries. They most commonly used PPI’s are those for finished goods, intermediate goods, and crude goods. They measure the price change throughout the manufacturing process.
Given in a monthly report in the US by Bureau of Labor statistics, U.S. Department of Labor, the PPI is the first inflation indicator each month. High PPI is associated with higher prices, leading to higher price inflation.
Payroll Employment
Payroll employment is measured via the Economic Cost Index (ECI), and it’s a measure of the number of jobs at larger companies in more than 500 industries in all 50 U.S. states and 255 metropolitan areas. ECI counts the number of paid employees working part-time or full-time in the nation’s business and government establishments. The changes in the payroll reflect the number of jobs created or lost and the changes are a strong indicator of the country’s economy.
Payrolls are classified into different sectors including manufacturing, mining, construction, services, and government. The manufacturing sector is the most closely followed as it often leads the business cycle. A person is considered employed if they are on a firms payroll for any part of the pay period that includes the survey week. Federal government employment is an exception, being measured at the end of each month.
Durable Goods
Durable Goods Orders measure and reflects the dollar volume of orders, shipments, and unfilled orders of durable goods. Orders are believed to be a leading indicator of activity in the manufacturing sector because manufacturers need orders before increasing production. They also measure the trends, as most industrial production is done to order, and is usually seen as a very good indicator of factory sector momentum.
The orders data is exremely volatile, and also known to be prone to large revisions when the complete information becomes available the following week. The measure often excludes the Transportation and Defense related orders since these are much more volatile than the others.
A high or increasing measure of Durable Goods Orders is usually associated with a stronger economic activity.
Retail Sales
Retail Sales measure the total receipts of sample retail stores representing all sizes and kinds of business in retail trade, showing very good and timely accurate broad consumer spending patterns. It’s adjusted for normal seasonal variation, holidays, and trading-day differences. Retail sales are a good indicator of consumer spending since they account for about 50% of the total consumer spending.
Retail sales include durable and nondurable merchandise sold, and services and excise taxes incidental to the sale of merchandise. It doesn’t include sales taxes collected directly from the customer. A high Retail Sales indicator is often associated with a strong economy. Also, strong Retail Sales create an expectation of higher short-term interest rates, which usually helps the country’s currency.
Housing Starts
Housing starts measures the number of housing units that begin construction every month. The beginning refers to excavating and setting a foundation for a residential house. This is a great indicator of construction activity, and with ore houses built every month the indicator can show a growing or rising economy.
Interest rate changes have a high impact on this measure, and vice-versa. An increase or decrease in the Housing Starts measure indicates a positive or negative change in interest rates. A high activity is commonly associated with a good and strong economic activity for the country
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