on the Forex market
Novotrend is designed for those just starting out.
acquaintance with the foreign exchange market
In this tutorial we will cover the following questions
The most important news;
How price increases can affect stocks, currencies and other instruments;
Why economic growth matters to investors around the world.
For the most part, fundamental analysis is associated with the release of news that can be viewed on the economic calendar. Some news is more influential than others. Certain data takes the market by surprise if it does not meet or exceed market expectations, so it can trigger significant activity.
Let's take a look at the key macroeconomic indicators that have a high impact on the market.
US nonfarm employment. (NonFarmPayrolls)
One of the most significant news is Payrolls, a payroll that records payroll data for the nonfarm sector, the largest sector of the economy. This news is published every first Friday of the month.
With consumers accounting for nearly 70% of US economic activity, the health of the labor market is of paramount importance to the country's overall welfare. Higher-than-expected employment growth may indicate that the US labor market is strengthening, improving the outlook for the US economy. This could have a positive impact on the US dollar and US stocks.
Weaker than expected employment growth, or even job losses, could have the opposite effect, weakening the prospects for the American economy. In this case, there is a fall in the US dollar and American stocks. It can also provoke an increase in the price of gold, which is traditionally the opposite asset for the dollar.
Inflation and the Central Bank
The main task of central banks is to maintain the stability of the economy and its growth. The state of the economy mainly depends on the level of inflation, so investors monitor inflation reports for clues about the future course of central bank policies.
If inflation falls, then the Central Bank will lower the interest rate, which will lead to a depreciation of the currency. The increase in inflation, in turn, provokes the Central Bank to raise the interest rate, because of this, the currency becomes more expensive.
CPI (Consumer Price Index)
CPI (consumer price index) is one of the most important indicators of inflation, one of the main indicators of inflation in the country.
If the publication of the CPI turns out to be higher than expected, it means that inflationary pressures will be high and the Central Bank could potentially raise interest rates, which will lead to a rise in the currency.
Central banks may try to counter the rise in inflation with higher interest rates, which will lead to the strengthening of the currency. On the other hand, low inflation can be counterbalanced by lower interest rates, which will weaken the currency.
GDP (Gross Domestic Product)
GDP (Gross Domestic Product) is the most extensive measure of economic well-being. It shows the total market value of all goods and services produced in the current year. GDP affects personal finance, investment and job growth.
Investors can monitor the growth rate of a country or economy to decide if they should adjust their asset allocation. They also compare the growth rates of countries with each other to decide where the best opportunities might be.
Such a strategy could also include buying shares in companies located in fast-growing countries. For example, suppose Germany's GDP is growing rapidly and the economy is outperforming other countries. You can buy CFDs based on the DE30 (Dax Underground, German Stock Exchange Index) as it can move higher than the stock markets of other countries.
Cutting through the market noise
Every day, almost every hour, a large amount of macroeconomic data is published, so you can easily find yourself overwhelmed with information. However, as a trader, you need to know what numbers can affect your open positions and what is really worth paying attention to.
At the start of your shopping journey, it might be worth focusing on the three indicators mentioned above before diving into other data such as consumer sentiment, business surveys, or even retail sales.
Please keep in mind that in addition to the aforementioned macroeconomic events or indicators, there are many other data that can also affect the market.