Stocks and stock trading are familiar concepts to the general public. However, most people are totally unaware of a lucrative opportunity right under their noses. Currency trading is the name given to this type of trading. If you can spot the right option and exploit it, foreign currency trading gives you a chance to make a profit. If you’re a forex trader, here are ten events and data points you need to watch.
1. GDP growth data.
To determine the total value of all products and services produced and supplied in a country over time, economists use the Gross Domestic Product (GDP) statistic. the GDP The growth rate is a measure used to compare the growth rate of the country’s economy over two separate periods. To give an example, India’s GDP grew by 6.1% in 2018-2019, which implies that GDP grew by 6.1% from the previous year.
2. Non-agricultural payroll figures
According to NFP data, only those employed in the United States are included. As a forex trader who trades USD-based currency pairs, this data can benefit. It is an excellent resource for learning about employment trends in non-agricultural fields. Therefore, a high nonfarm payroll indicator indicates an expanding economy because more jobs are being created and more people are employed. Weaker NFP measures, on the other hand, show a slowing economy.
3. Unemployment rate
The unemployment rate measures the percentage of the country’s labor force that is unemployed. It is also a great way to gauge the state of a country’s economy. Contrary to popular belief, this rate has a significant impact on the direction in which a currency’s exchange rate moves. A high unemployment rate hurts a country’s GDP because it means there will be more small purchases of goods and services, which means there will be less demand for products and services.
4. Interest rate announcements
It is the interest rate at which a country’s central bank lends money to banks and other financial institutions. Monetary policy committees of major banks such as the Reserve Bank of India, Federal Reserve, European Central Bank and Bank of England make frequent announcements on loan interest rates and monetary policy stance . Central bank monetary policy committees typically make interest rate announcements once every three months.
5. Consumer Price Index (CPI) Data
The cost of living index data, often referred to as the consumer price index (CPI), serves as an indicator of inflation. As we saw in the previous chapter, the value of a currency decreases and depreciates when there is excessive inflation. There are many reasons why a high CPI could cause a country’s central bank to raise interest rates. In most cases, the Consumer Price Index (CPI) is released once a month.
6. Purchasing Managers’ Index data
As a series of indicators, the PMI measures economic trends in various industries. It encompasses both the manufacturing and service sectors. Researchers can gauge whether the economy is expanding, stagnating, or declining using this information. A country’s central bank would often intervene and lower interest rates if its PMI fell below a certain threshold, hoping to stimulate economic growth and consumption. As a result, the country’s currency would lose value.
7. Basic Retail Sales Data
Basic retail sales data for the United States is a measure of economic activity that describes total retail sales (excluding auto and gasoline sales). Indicators of the health of the country’s economy are provided monthly, and it monitors consumer spending. The value of the currency may rise if the basic retail sales data is positive.
8. Consumer confidence and mood indices are also included in this measure.
The Consumer Confidence and Sentiment Indexes measure how consumers feel about the economy. The value of a country’s currency can be lowered if its consumer sentiment is strong, and the reverse is true if it is weak.
9. Industrial Production Index
Manufacturing, mining, natural gas and electric utilities all play a role in the calculation of the industrial production index. Every month, the Federal Reserve releases this index, which serves as a good measure of the health of the country’s economic system.
Uncertainty is the bane of every investor’s existence, as we have already demonstrated. When a country goes to the polls, there is always a feeling of uncertainty. Uncertainty about a country’s currency can play a role in its devaluation from time to time. Traders and investors in such a situation are more likely to sit on the sidelines and wait for election results before doing anything. In any case, the currency of the country in question should be volatile after the announcement of the results.
Conclusion: If you are going to trade currencies, it is always a good idea to look at all such occurrences of both the base currency and the quote currency.