News about the condition of an economy is the basis of trading. Economic health of the country practically is always reflected in the price of currency.
There are two basic ways of the analysis of a situation in the market - fundamental and technical. In this section we will examine the first one.
The fundamental analysis is established from an estimation of a situation from the point of view of political, economic and financial-credit policy. Traders judge economic well-being on certain fundamental indicators.The most important indicators
1. Unemployment (Non Farm Payrolls - in the US)
Unemployment measures the condition of the market of workplaces. One of the ways by which analysts measure the health of an economy is the quantity of the new workplaces created in non agricultural branches of economy for 1 month. The increase in this parameter characterizes increase in employment and leads to increase of a dollar exchange rate. On supervision, the increase in its value on 200 000 in a month is equated to increase in gross national product at 3.0 %. It is published, as a rule, on the first Friday of each month at 08:30 EST.
2. The decisions under interest rates (FOMC)
The Federal Open Market Committee of Federal reserve system of the USA establishes interest rates during sessions. There are 8 sessions planned per year. Their date is known in advance.
3. The Trade balance
The Trade balance defines a difference between the imported and exported goods and services. When a trading surplus results, the national economy experiences proficiency, at lack - deficiency.
The data on trade balance is published in the middle of the second month after the accounting period.
4. The consumer price index (CPI)
The given parameter reflects the price of the fixed quantity of the goods, therefore is the key indicator of inflation. Higher prices are considered as a negative result for the economy. However the Central Banks often answer inflation by an increase of interest rates, and currencies in turn react positively to messages on growth of the inflation.
CPI leaves monthly about 13-th of each month at 8:30 AM EST.
5. Retail Sales
The Index of retail sales measures the total of the goods sold in retail shops. It is used as a parameter for purchasing activity and defines influence on growth of economic activity. It is published monthly about 11th of each month at 8:30 AM EST.
Influence of fundamental factors on change of a rate of national currency
Data | Change of the data | Change of a rate of the national currency |
Trade deficit | Growth | Decrease |
Payment deficit | Growth | Decrease |
Consumer price index, Producer price index | Growth | Decrease |
Official stock-taking rates | Growth | Growth |
Gross domestic product GDP | Growth | Growth |
Retail sales | Growth | Growth |
Housing starts | Growth | Growth |
Producer price index | Growth | Decrease |
Industrial production | Growth | Growth |
