Major Indicators in foreign currency trading
As we previously discussed in our basic economic indicators and advanced economic indicators articles, economical indicators have much importance when trading forex. National currencies reflect the economic state of their nations. All the economic wealth and changes of a country is represented in its currency. The major economical indicators are a common and good way to track and measure the economical condition of a country. When trading forex you should track after each countries major indicators with meticulousness and careful attention to the nitty-gritty details. Generally there are two types of indicators – those who lead and those who follow. Leading indicators are indicators that change before economical trends and movements begin and in some degree predict them, they are the majority of the major indicators. Following indicators are called lagging indicators and as their name points they change after an economical trend has begun. Below is a list of the major indicators in the world economy.
GDP (Gross Domestic Product) - The GDP represents the total amount of all the commodities and services created by both local and overseas companies. GDP signifies the rate of growth (or decline) of a country's economy and it is regarded as the most wide-ranging and major indicator of the economic productivity and expansion.
PMI (Purchasing Managers Index) - The Institute for Supply Management, previously named the National Association of Purchasing Managers, releases to the public on a monthly basis a combined directory of the general manufacturing provisions, created from information on new orders made, rate and amount of manufacture, delivery periods by suppliers, accumulations, accounts, charges, employment statistics, amount and size of export and import orders. The index is divided into manufacturing and non-manufacturing groups.
Industrial Production – This is indicator measures the change in the productivity of a nation's factories, mines and service providers. This major indicator also measures their industrialized capability and how much of the available assets and resources are being used by the productive segments of the country. In other words it measures the capability to grow and produce of these sectors. It also measure how much of the factories production capacity is actually being used.
PPI (Producer Price Index) – This major indicator is a assess of the cost changes in the manufacturing segment. It quantifies middling transformations in vending prices that the local producers in the manufacturing, farming, mining, and electricity industries receive for their production. The producer prices that are used to determine economical effects are usually those of the complete commodities, rudimentary commodities and transitional commodities.
CPI (Consumer Price Index) – This indicator determines the standard level price paid by consumers from urban areas (they present more than 80% of the general populace) for a set basket of commodities and receivable services. It indicates price fluctuations in more than 200 different categories. The CPI also incorporates a variety of consumer charges and tolls that are immediately connected to the costs of particular commodities and services.
ECI (Employment Cost Index) – This major indicator measures the volume of employment of the nation. The employment estimations are supported by an inspection of the bigger companies and calculate the amount of salaried workers working part-time or permanent jobs in the country's industry, management and governmental organizations.
DGO (Durable Goods Orders) – This major indicator checks the amount and size of new reservations made to local companies for direct and prospect distribution of industrial durable supplies. Durable goods are classified as a product that can be used an extensive amount of time (more than 3 years) throughout which its productivity is comprehensive.
Retail Sales - This report measures the total revenue of vendors, using examples that represent all volumes and types of companies that deal with retail vending all through the country. This major indicator represents consumer spending patterns in a very exact and evenhanded way. The reports are adjusted to holidays and different trading days. The Retail sales indicator includes robust and temporary products traded. The indicator also reflects expunge taxes accompanying the vending of commodities. The indicator excludes taxes taken from the consumer for the purchase of the specific product, by the vendor.
Housing Starts – This monthly indicator checks the number of residential units that are began their construction in each specific month. This indicator mainly logs private houses and attributes the beginning of the excavation or laying foundations to be the start of the construction. The rate of interest affects housing costs and thus growth a great deal. The housing sector is one of the first markets to react to changes in the national interest rate. When analyzing this indicator you should pay attention to the divergence between to subsequent months, in percentages. The housing starts indicator is released approximately at the middle of the month.
Thomas Green, Editor
2006–01–04
