Jun 07 2020 0
Investors always want to learn how to trade forex fundamental news. Fundamental news will give them details on whether the value of the dollar is going up or down. Just like many indicators that stock investors use to track the health of companies, there are many economic reports that provide insight into the future value of the US dollar.
Introduction to fundamental analysis in forex trading
Fundamental analysis involves using data to discern information about forex investing. The strength of the economy or currency provided by these data will be of varying importance.
Some notable macroeconomic indicators will be listed below. Remember, the actual statistics are often less important than its trend (meaning whether it is up or down), the success or failure of an indicator is the fulfillment of expectations prior to its release. A bullish surprise can bring good news, while a bearish surprise can cause the dollar to fall.
How to trade forex fundamental news
If you want to trade forex successfully, you should notice the following fundamental news. They play a great role in deciding where the market is heading.
Current Account Balance
This information is released quarterly (at 1.30pm GMT), approximately 30 days after the end of the quarter. The current account balance measures U.S. trade in goods and services and includes income from overseas investments and payments to entities abroad.
A positive value (current account surplus) indicates that capital inflows from these components into the US exceed capital leaving the country (more money coming in than leaving the country). A negative value (current account deficit) means there is a net inflow of capital from these sources (more money leaving the country than coming in). Increasing the long-term current account deficit can have a negative impact on the US dollar as it affects the likelihood of future rate hikes if the economy doesn't do well.
Trade Balance
This information is released (at 1.30pm GMT) approximately 40 days after the end of the quarter. The balance of trade shows the difference between US exports and imports of goods and services. A positive equilibrium is called a trade surplus if there are more exports than imports of goods and services. A negative balance is called a trade deficit or, if imports are more than exports. The long-term effects of a worsening trade balance put downward pressure on the US dollar.
Consumer Price Index (CPI)
This information is released monthly (at 1.30pm GMT), approximately 15 days after the month ends.
CPI is often considered a measure of inflation of the US economy. The rapid rise in the value of CPI figures could prompt the central bank to respond by raising interest rates. An increase in interest rates usually increases the value of a country's currency, but it can negatively impact the stock market in the short term. This is because some investors may decide to keep their deposits as cash to earn interest instead of investing in the market.
Producer Price Index (PPI)
This information is released monthly (at 1.30pm GMT), approximately 17 days after the month ends.
PPI measures the change in prices of factory-made goods. A rapidly rising PPI is considered inflationary and can lower bond prices and raise long-term interest rates. The impact on the US dollar and US stocks is often ambiguous and must be read in conjunction with other economic data releases.
Non-farm Payrolls
This information is released monthly (at 1.30pm GMT), usually on the first Friday after the month ends.
This is a Forex news Statistical Monthly Survey of Nonfarm Payroll Employment across the United States and one of the most important and closely watched economic releases in the world. If the numbers rise, interest rates and the US dollar will generally rise. If the data is weak then interest rates and the dollar will usually fall.
Unemployment claims
This information is released weekly (at 1.30pm GMT), five days after the end of week.
This is the number of individuals who filed for unemployment insurance for the first time in the past week. This is the earliest US economic data. If jobless claims rise, you can expect the stock market and the US dollar to fall in value.
Gross Domestic Product (GDP)
This information is extremely important, released quarterly (at 1.30pm GMT), approximately 30 days after the end of the quarter.
Gross domestic product (GDP) is one of the main indicators used to gauge the health of a national economy. If US GDP is positive, it is expected that the US dollar will increase as the economy strengthens.
Conclusion
In addition to the above 7 types of forex news, there are many other important news, including inflation reports, home sales and buying US Treasuries. This news also affects the US dollar.
The government plays an important role in the strength of the dollar, as foreign investors see signs of stability and prosperity. Stable policy, stable politics and tax cuts for consumers are all positives for the dollar. On the other hand, terrorist attacks, wars, increased government spending are all bad news for the country and the dollar.
Developments in other countries are also taken into consideration, as factors such as the appreciation of the euro or a decrease in foreign currency reserves (the dollar is held by other countries) are bad news for the dollar, while instability abroad is good news for the dollar. That’s what you should know when learning how to trade forex fundamental news.
