Major Economic Indicators using in Forex fundamental analysis are given below with brief Introduction. We are going deep on each Forex economic indicator.
News Categories of Forex Fundamental
- Production – Anything that the country makes, through these indicators the bank sees whether the country is being productive or not
- Geopolitical – Non economical things that can cause risk in the market (e.g. change in government, wars etc.
- Employment – How many people are unemployed
- Growth – Is the country growing is there an overall increase in production
- Inflation – How the cost of goods and services are moving
Now, these are the categories of the major economic indicators. We have production, geopolitical employment growth and inflation, these are the main categories. Now production indicators that gives us insight into how production is doing in a country okay. These indicators are used by the central bank to see whether the country is being productive or not.
So, examples of production indicators are PMI, the Philly fed index etc. So, central banks used These indicators to give them insight into whether a country is being productive or not. So, in So, in order to get an early estimation of what growth is like central banks use these indicator use production indicators such as the PMI and the PPI index to give them early insight as to what to expect for GDP, no geopolitical indicators. No these are non-economic things that can cause risk in the market. No example is changing government, our wars, no employment.
Now examples of employment indicators are like non-farm payrolls, jobless claims and the employment rate. No, these indicators give you an understanding of all many persons are unemployed in an economy. Okay, so these indicators give you an understanding of how many persons are unemployed and four Example the non-farm payrolls gives you an example as to how many jobs are being added to the workforce each month. So, the central bank must pay keen attention to employment indicators, employment can be affected by low growth. So, if we have low growth, we if we have low growth, this can cause an increase in unemployment, okay.
So, if we have unemployment as a result of low growth, what the central bank will do is try and increase the money supply in the economy. So, the central bank will try to increase the money supply in the economy in order to stir up production and employment. So, more persons have access to loans and more money in the economy should increase demand and hence increased production. So, when there’s unemployment as a result of lack of growth, you may see the central bank lowering interest rates Are you may see the central bank implementing QE program this is quantitative easing, where the central bank pumps money into the economy also unemployment can be caused by increased inflation.
Now, this is when increased prices causes a decrease in demand and a decrease in demand results in a decrease in production and if employers are not producing as much then employers do not need as much employees. So, this can cause unemployment and I explain this further on in the course so I inflation can cause unemployment so the central bank as the key keen focus on unemployment indicators, and this is one of the main reasons why indicators such as the employment rate and non-farm payrolls as such a huge impact on the market. No growth in the cases not an example of a growth indicator is GDP, which is the gross domestic product, and this is released every month.
Now, this tells us if the economy is growing or not, we want to see an increase in the GDP number we want to see a constant increase in the GDP number and this tells us that the economy is growing because increasing GDP means increasing production, which is growth, and we also have inflation indicators know an example of an inflation indicator is the CPI and this is released every month. Now, the CPI is the consumer price index and gives us insight into the rate of inflation in a country. So the central bank pays keen attention to CPI to always have an understanding of the level of inflation in a country and inflation is our cost of goods and services are moving so if the cost of goods and services are increasing.
We have increased inflation. And if the cost of goods and services are decreasing, we say we have a decrease in inflation or decrease inflation. The next lecture we be looking at tools for economic stability.
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