In the last lesson we saw what fundamental analysis consists of and pointed out how this permeates everyday life and how to see its effects. In this lesson we’ll see what specific factors are taken into account in fundamental analysis, or which are the economic indicators of a given context. Here are the most important economic indicators for fundamental Forex analysis:
- GDP or Gross Domestic Product
- Industrial Production
- Durable Goods Orders
- Retail Sales
- Business Stocks or Inventories
- Stocks of Wholesalers
- Factory Orders
- Household or Personal Income
- Consumption Costs – PCE or Personal Spending, Personal Consumption and Expenditure or Personal Expenditure
- Unemployment Rate
- Trade Balance
- Interest Rate or Reference Rate
As you can easily see, these are terms that you hear every day in economic news. GDP figures are certainly the most resonant, as is the rate of unemployment and household income.
Interest rates, crucial for currencies
We have emphasized several times that there are some important decisions that influence the trend of currency prices. One of the most important economic indicators is the interest rate. In fact, think of a conference in which the president of the ECB or the FED announces interest rate cuts. This type of announcement always has immediate effects on the reference currency cross so it is always good to take advantage of it, or close the positions that may become dangerous.
The welfare of the economy
All the economic indicators listed above are going to play an important role in the well-being of a given economy. An economy that has positive ratings on all these factors is certainly a healthy economy. Now: it would be simple but not trivial to specify that if an economy is good and solid, the more it will grow and that currency will be solid. For this reason, we recommend you always keep the US dollar as a reference and as a product on which to invest. The United States is certainly the strongest and most stable economy in the world, with potential always around the corner, fuelled by a character of mobility both in work and in the flow of investments.
Euro against Dollar, the infinite challenge
Since the birth of the Euro, EUR/USD has always been the most traded currency pair for many reasons. The most important is the relative ease of predicting its movements, compared to other pairs, especially the most excessive ones. Therefore, it is advisable you start and continue Forex trading activity on this pair.
Go to the next lesson – Impact of economic indicators on Forex