CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76.09% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

The vast majority of retail investor accounts lose money when trading CFDs.
76.09% of retail investor accounts lose money when trading CFDs with this provider.

Important economic indicators that impact the forex market

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Author: Leon Marshall

Among the most important factors in forex are your trading and risk management strategies, as well as your ability to adjust them in accordance with ongoing market changes.

Indicators can help you build an appropriate strategy so you can monitor your market of choice freely.

Economic indicators in particular are a great way to jump before the shockwave hits. News travels fast, and the bigger the news, the bigger the impact.

Fundamental analysis and economic factors

Analysing the forex market consists of both technical and fundamental analysis.

Fundamental analysis uses macroeconomic statistics to measure the equilibrium exchange rate, including inflation rates, labour data and economic growth, which are more often used to determine the quality of long-term investments.

While there are long-term factors that are on a macro scale, there are also micro-scale news that set a momentum right after release. They do not last more than a few days and distinguish themselves as short-term trendsetters.

Various economic indicators perform different functions. There are those that analyse the economy’s previous growth trend and those that predict its future performance. Leading economic indicators are those that offer the most in terms of indicating an economy’s potential trajectory. For traders who are in search of the most important economic indicators, here are three of them that impact the forex market.

Gross Domestic Product (GDP)

Business is cyclical and consists of two phases – expansion and recession. Economic activity has growth periods and contraction periods. GDP tracks the health of a country’s economy with reports released every quarter and is used as an indicator to determine its overall performance.  Massive amounts of time and effort are put into compiling these reports. However, they help confirm predictions of economists and traders on a broader scale and in the event of a different outcome than what was expected, it can turn out to be a huge market-moving factor.

Labour Market Statistics – Unemployment Rate

The labour market has many statistics that can provide useful information in indicating movements in the forex market. The one that stands out the most is the unemployment rate. Unemployment rates naturally fluctuate in line with recovery and stagnation. Job creation, low unemployment rates and wage growth lead to an increase in consumer spending, resulting in an overall growth of the economy. Conversely, product demand can lead to a jump in employment and a decrease in the unemployment rate. Long periods of unemployment, in turn, tend to alter consumer sentiment and affect both consumer spending and economic growth.

Non-Farm Payroll (NFP)

An economic indicator similar to GDP but with a more frequent reporting rate is NFP. It is also related to both the business and employment cycles and is consequently affected by such changes. Non-Farm Payrolls themselves are a great insight into an economy’s performance. Moreover, NFPs are released a few days after the end of every month which makes it much easier to gauge the accuracy of economic predictions and movements in a currency’s value.

Trading on margin is high risk.