Lots of factors influence the Forex market. It is absolutely necessary to understand the nature of the factors being the true reason of daily price changes in the market. First of all, these are economic factors.As a rule, economic data and indicators are formed on the state level and are used for analysis of the state and abilities of any country’s economy. Economic reports combined with the government policy and current events reflect the economic health of a country in general.
As a rule, economic data and indicators are formed on the state level and are used for analysis of the state and abilities of any country’s economy. Economic reports combined with the government policy and current events reflect the economic health of a country in general.
Events and the state economic policy
Current events and the state economic policy are the paramount indicators being analyzed by professional Forex market players. Changes on the market can also be caused by the unemployment rate, inflation rate and state commercial relations. If optimistic moods are strong in a country, the currency rates will reflect it. If moods of trouble and anxiety are noted in a country, high rates of unemployment and inflation are marked, this will also be reflected in the currency rate. Sometimes these indicators may not be evident, but still, they can be a starting point in significant currency rates fluctuations.
Gross Domestic Product (GDP)
Gross Domestic Product (GDP) is another economic indicator used in the Forex market analysis. GDP is considered to be the most important indicator of a country’s economy, demonstrating the cost of all products and services produced in a certain country. Usually, this indicator is produced once a year. GDP growth gives evidence of the country’s economy growth in general, and accordingly, reflects in the strengthening of the national currency.
Retail Sales
Retail Sales is the third economic factor often used by Forex market analysts. It demonstrates the overall level of retail sales in a country and is important because it shows consumers’ behavior, moods and growth (or fall) of consumer spending.
Industrial Production Report (IPR)
Another reliable indicator in the currency market is Industrial Production Report demonstrating fluctuations in various industrial sectors. This report provides data on actual production and industrial production growth rate depending on the overall potential capacity in a certain time period. If a country’s industrial production rate is high, it positively influences the national currency rate on Forex.
Consumer Price Index (CPI)
Consumer Price Index (CPI) is the fifth and the last of the most important economic indicators of a certain country. It demonstrates a change of prices on consumer goods in 200 categories. Due to this report, the export component of a country’s economy is also defined. The growth of the index leads to weakening of the national currency.
Conclusion
It’s not a secret that many factors influence the Forex market. The given indicators usually follow a certain trend, thus the importance of understanding how each of them works and what it can influence is obvious for anybody working on the currency market. Some of the indicators are self-sufficient, but some of them are recommended to analyze in correlation with others for making correct forecasts about possible movements in Forex.