The reports including statistical data on basic topics such as GDP, international trade, employment, manufacturing, retail sales, housing and interest rates are called fundamental indicators. There may be an effect on the value of a country’s economy in a direct or indirect manner with respect to the growth, stability or decline in any of the above mentioned areas.
Factors involved in forex trading
The responsibility of maintaining the base interest rates of a country lies with the central bank of that country and in this way the bank plays a vital role in the forex market. A central bank attempts to pursue growth in the economy along with curtailing inflation, hence it must manage to maintain a fine balance while setting interest rates. Speculation in the forex market is often fuelled depending on a central bank’s decision to raise, cut or hold the interest rates thus changing the value of a currency or group of currencies.
The rates of essential items such as oil and gasoline are also important indicators as consumer spending and confidence can be hurt by soaring prices which may result in a cut back in certain business activity and government services. Also information about a country’s economy is reflected in national and international political events and changes in government policies related to trade and elections.
Some events such as natural disasters and calamities, terrorism, and military actions in sensitive areas of the globe cannot be predicted and therefore may also cause uncertainty in the market. Events such as these also have an impact on the forex market as they develop.
If a trader follows the forex market and related news feeds one can obtain a very valuable tool through which to identify patterns in macroeconomic signals and also can understand central banks current and future actions.
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