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5 Key Economic Indicators and FX trading

FX tradingWhen it comes to identifying the state of country’s economy, the main tool you will have is the currency. A country’s currency value changes depending on economic indicators that their managements produce. These values are made to evaluate the country’s economic health; and these have a direct impact in the FX trading market confidence. Hence, if you are an FX trader at the broker with negative balance protection, the economic indicators are something you will want to take into consideration.

Indicators and market

The data from each indicator is released in a specific period of time, some are released with more frequency than others. As an FX trader at the negative balance protection broker, for you it’s essential to know the releasing dates of these 5 main economic indicators because there is considerable market activity during these dates, affecting the volume generation and making prices to change. Knowing when their new versions come out to the public and learning how to read the values can make a great difference for you and your portfolio:

These key economic indicators and their release schedule are the following:

Economic Indicator Release Schedule
Nonfarm payrolls – Unemployment First Friday of the month at 8:30am EST
FOMC Interest Rate Decisions 8 meetings per year
Trade Balance Around the middle of the second month after the reporting period.
Consumer Price Index (CPI) – Inflation Monthly – around the 13th of each month at 8:30am EST
Retail sales Monthly – around the 11th of each month at 8:30am EST

Key Indicators, explained:

-Nonfarm Payrolls – Unemployment

This indicator has to do with the number of jobs that are created and held. Logically, if there are more jobs in the country, it means that the economy is growing to meet the workforce needs from the market. Then, this indicator shows how strong the labor market is, as it shows a growing tendency.

 

– FOMC Interest Rate Decisions

When the Federal Reserve Bank lends money to banks for a very short period of time, it applies a changing discount rate set by the Federal Open Market. The rate is the result of negotiations between the Federal Reserve Board and the regional banks.

– Trade Balance

The trade balance gauges how many goods have been imported, and how many have been exported. When there are more imports than exports, it is called a “deficit”. If there are more exports than imports, it is called a “surplus”.

– CPI – Consumer Price Index

Inflation is measured mostly through the CPI. In this indicator the prices of a list of main consumer goods is published. If the prices have increased since last month, it is seen as a bad economic sign. However, high inflation rates may not be negative for traders, given by the possibility of good currency exchange due to rises of interest rates.

– Retail Sales

Retail sales indicator shows figures of all the merchandise from retail stores that is bought by consumers. Retail sales reflect the state of the economy, if there’s a lot of confidence and activity from the buyers’ part, it means that the economy is better.

FX trading tip: Pay attention to market expectations

A very good advice for you as FX trader at the Forex broker with negative balance protection is that when release dates are close, you may want to hear what economists predict, as well as their market expectations, because it could be much more useful for your decisions in the near future than the actual data. Most importantly, try to agree with the person’s opinion before you get into the same trade.

Being aware of the market expectations will allow you to be prepared and take advantage of the great trading possibilities that come out just after the release of the data. After that, you will have time to analyse thoroughly the actual data and its consequences.

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