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Top Market Moving Economic Indicators FX Traders Should Watch
Forex trading using economic indicators can be tough, as traders are overwhelmed with a variety of information which can lead to overanalyzing the market and even become counter-productive. To avoid information overload, traders should concentrate on the primary economic indicators that influence the market.
What are Economic Indicators?
Economic indicators can help represent the various economic activities of a country or region. They give valuable insight into present business performance, as well as future direction of an economy.
Before we explain the different types of economic indicators, let’s first see how indicators are classified according to the business cycle. The business cycle is a very important concept in modern economics. It represents a fluctuation in the general economic activity, with highs and lows, expansions and contractions which happen periodically. For example, a contraction in the economic activity which leads to a negative growth of the gross domestic product in two successive quarters is considered a recession.
Economic Indicators are usually classified in several ways. The major types of economic indicators are leading, coincident and lagging indicators.
Economic Indicators that predict future changes in economic activity are called leading indicators. Indicators that change simultaneously with the change in economic activity are called coincident indicators. And finally, indicators that confirm that a change in the economic activity has happened are called lagging indicators.
Unfortunately for traders there is no one leading forex economic indicator data set that can successfully predict all future level of economic activity and the change and direction of a currency’s exchange rate.
A holy grail in the forex market is still not available to traders despite some forex advertisements you may see to the contrary.
In this article, we present the major forex economic indicators that affect the forex market, with the ability to predict future price changes of currencies. Traders should make sure use a reliable economic indicators calendar and prepare for potential increased market volatility during those reports.
jobs-market-economic-indicatorsEmployment Reports
The employment situation is one of the most important among the forex fundamental analysis indicators that every trader should watch closely. Job creation can reveal a lot regarding the general state of an economy. It is closely linked to future consumer spending, and for the US economy, consumer spending makes up the largest share of GDP with around 70%. The labor data report is a leading economic indicator and can tell us a lot about future economic growth.
The US Bureau of Labor Statistics releases the employment report on the first Friday of every month, at 8:30 EST. Most professional traders and Institutional traders plan most of their week around it, as it is usually the highest volatility scheduled market event for the month.
The US employment report includes a number of labor indicators which are released simultaneously: the non-farm payrolls, the average hourly earnings and the unemployment rate. To understand and trade the employment report successfully, traders need to be aware of all these figures related to the overall release. For example, the impact of a rising non-farm payrolls number can easily be canceled if the average hourly earnings didn’t meet expectations. A falling unemployment rate is usually followed by an increased pressure to raise wages, as fewer people in the workforce are available to meet the demand by companies and hiring managers.