Many factors affect Forex trading. It is critical to know and
understand the various factors that cause the Forex to fluctuate from
day to day. The foreign exchange market will change depending on the
economic factors that play a role in the movement of currency. Guest post by David Mclauchlan
Economic factors and indicators are released by the government
or by private organizations that can look in depth at economic
performances. These indicators can be used to analyse economic
performances from any country. The economic reports measure a country's
economic health, in addition to government policies and current events.
For the most part, a reputable broker can look at economic
indicators and know which trades will be best. Reports on these
indicators are released at scheduled times and can tell if a certain
country is experiencing improvement in the economy or if the country's
economy is on the decline. When the prices fluctuate, a great deal one
way or the other, the price can be affected.
Current events and the state of the economy in any given nation
is one of the top economic indicators used when analyzing the Forex.
Factors such as unemployment numbers, housing statistics and the current
state of a country's government can all affect changes in the Forex.
When a country is feeling optimisitic about the current state of affairs
in their country, prices of the Forex will reflect this. When a nation
experiences political unrest, large amounts of unemployed workers and
inflation, the rate of the currency will be reflected. Sometimes, this
indicator tends to be overlooked, but can serve as an important gauge in
the fluctuations of the Forex.
The gross domestic product,or GDP,is another economic indicator
used when looking at the foreign exchange market. The GDP is considered
the widest and broadest measure of the economy in a country. The gross
domestic product represents the total market value of all goods and
services that are normally produced within any given country. This is
usually measured in the time frame of a year, and not in weeks or
months. Using a larger time period gives good statistics on the products
and services that are produced in the country. This indicator is not
used alone when forecasting the Forex. The GDP is considered a lagging
indicator, meaning that is a measurable factor that changes after the
economy has already began to follow a certain trend.
Retail sales reports are the third economic factor that is often
used in analyzing the Forex. This is the total receipt of all retail
stores in any country. Usually, this measurement is not every single
retail sale, but is a sample of diverse retail stores throughout the
country. This is considered a very reliable and important economic
indicator because of the consumer spending patterns that are expected
throughout the year. This factor is usually more important that lagging
indicators and gives a clearer picture of the state of the economy in
any country.
Another reliable economic indicator in the foreign exchange
market is the industrial production report. This report shows the
fluctuation in productions in industries such as factories, and
utilities. The report looks at actual production in relation to what the
production capacity potential is over a period of time. When a country
is producing at a maximum capacity it positively affects the Forex and
is considered ideal conditions for traders.
The consumer price index, or the CPI, is the last critical
economic indicator in analyzing the Forex. The CPI is the measure of the
change in the prices of consumer goods in 200 categories. This report
can tell whether or not a country is making or losing money on their
products and services. The exports that a country has are very important
when looking at this indicator because the amount of exports can
reflect a currency's weakness or its strength.
The Forex is affected by many factors. These factors usually
follow a certain trend so it is important to understand how each factor
works in forecasting the Forex. Some are good indicators alone while
others should be used together for accurate Forex predications.
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