ATR-Forex.com

Advanced Trading Resources

English 中文（简体）‎ 中文（繁體） ‎

Key Economic Indicators for Forex Trading

Consumer Price Index (CPI)

Consumer Price Index (CPI) is a key economic indicator for measuring the level of inflation in a country or territory. It is calculated from average changes in the prices of goods and services bought by consumers. Most central banks set targets of controlling CPI to certain level in order to keep price stability. If CPI surpasses the targeted level, a central bank would often raise interest rate to combat inflation. The expected or actual raise of interest would in turn push up the value of the associated currency. Therefore, a greater-than-expected increase or a smaller-than-expected decrease in CPI normally leads to appreciation of the associated currency in forex trading, whereas a greater-than-expected decrease or a smaller-than-expected increase in CPI normally leads to depreciation of the associated currency.

Balance of Trade

The value of a country's exports minus its imports. If the import of the United States exceeds its exports, it is said to have a balance of trade deficit. Changes in balance of trade may influence the forex rate of currencies of export-oriented countries such as Japan.

Employment / Unemployment

The employment or unemployment situation is a key economic indicator for all countries and territories as well as an important market mover in forex trading. For instance, the Non-Farm Payroll (NFP) data is most closely watched by forex traders. In forex trading, the exchange rate of a currency tends to decline when its associated unemployment release is greater than forecast, or vice versa.

Gross Domestic Product (GDP)

The market values of goods and services produced within the borders of a country or region in a given period. GDP indicates the output and growth of a country's economy. In forex trading, the quarterly and yearly GDP data are considered important economic indicators.

Industrial Production

Industry production measures the aggregated output value of production by factories, mines and utilities within a country or territory. In developed economies associated with major currencies in forex trading, industry production account for about one-quarter of their overall economic activities. The ratios are generally even higher in most newly developed or emerging economies. Therefore, industrial production is a good indicator of the general health of an economy. In forex trading, a greater-than-expected increase or a smaller-than-expected decrease in industrial production normally leads to appreciation of the associated currency. Alternatively, a greater-than-expected decrease or a smaller-than-expected increase in industrial production normally leads to depreciation of the associated currency.

Producer Price Index (PPI)

The Producer Price Index (PPI) is an economic indicator for measuring the level of inflation in a country or territory. It is derived from average changes in selling prices of suppliers to producers. As increased PPI often implies inflation of consumer products and thus higher interest rate, a greater-than-expected increase or a smaller-than-expected decrease in PPI normally leads to appreciation of the associated currency in forex trading. Alternatively, a greater-than-expected decrease or a smaller-than-expected increase in PPI normally leads to depreciation of the associated currency.