Top Economic Indicators that Affect Forex

Market observers religiously follow Forex news, especially the economic indicators published by government agencies and private sector. This helps them keep a watch on the economic health of a country. Economic indicators have the potential to move prices and generate volume, as people monitor and react to the data. While there are several economic indicators, only a few are used and important at a given time. For instance, in a country where price rise is a problem, inflation is a key economic indicator. In a place where employment is a problem, employment data and GDP reports are important.

Two main types of economic indicators are: leading and lagging indicators. Leading indicators are economic factors that change before the economy starts following a particular trend, and lagging indicators are factors that change after the economy starts following a certain trend. Leading indicators help predict changes and lagging indicators help confirm changes.

Forex News: Key Economic Indicators

Here are the main economic indicators that Forex traders use for making trading decisions:
Gross Domestic Product (GDP): The broadest measure of a country’s economic growth, GDP indicates the speed at which a country grows or shrinks. It is the total sum of services and goods produced within a country in a year. A larger time period is used to get accurate, reliable production statistics in a country. GDP is a lagging indicator, as it changes after the economy begins following a particular trend.
Industrial Production: It indicates changes in industrial production, which include mines, factories and utilities. It also measures the country’s capacity utilization as well as the total industrial capacity. When the industrial production is at its maximum, Forex as well as trading is affected positively. The economies of big players are affected immensely by the manufacturing sector.

Consumer Price Index (CPI): It is a measure of the average price paid by urban customers for a fixed set of goods and services. It reports price change in over 200 categories. It also takes into account the taxes and user fees associated with those goods and services. It is an indicator of the money made or lost in producing goods and services

Producer Price Index (PPI): It mirrors the average change in selling price that domestic producers working in the manufacturing, agriculture, mining and electric utility sectors receive. PPIs for crude, intermediate and finished goods are usually used for economic analysis.

While using Forex news related to economic indicators, traders must understand that these follow a certain trend. The key is to understand these trends and make sound trading decisions.