Understanding Statistics That Affect Forex

It is important as a forex trader to understand some figures that affect your market. This will help you in coming up with measures to adapt to them in advance. There are different economic statistics that affect forex market. They include Trade Balance, GDP (Gross Domestic Product), Consumer Price Index (CPI) e.t.c.

Trade balance is a chief pointer of forex trends and normally seen as isolation, rate of import and export as important indicators of general economic activity in the country’s economy. Trade Balance is a measure of the difference between import and export of material goods and services. The level of Trade Balance and alteration in export and import figures are widely followed by effects in forex market. It is important to study the trend growth rates in exports and imports regularly. Rates in export and imports activities are usually a sign of the competitive position of your country, and also the strength of economic activity in foreign countries.

A country that runs a considerable deficit in Trade Balance has a weak currency due to the continued commercial selling of its currency. This can however be counterbalanced by financial investment flows for a longer period of time.

Another economic aspect that affects the performance of the forex trade is the GDP (Gross Domestic Product). It is the measure of collective economic activity in any given country. Growth in a country’s GDP is normally followed by the primary indicator of the strength of forex market performance. GDP corresponds to the total value of a country's purchases of locally produced goods and services by individuals, businesses, foreign investors and the government organs. Growth in GDP figure is often linked with the expectations of high interest rates. However, this is positive at least for a short term for the currency involved.

Consumer Price Index (CPI) is another aspect that can cause a shakeup in the forex fraternity. It is a measure of average level of prices of fixed goods and services purchased by consumers in a given country. The Consumer Price Index is a primary inflation pointer which reflects the consumers’ spending accounts for nearly two-thirds of economic activities. Usually, the Consumer Price Index is affected most by prices of food and energy as these items are generally more volatile than other CPI and can cause ambiguous to the more important underlying forex trend.

Rise in inflation is normally related to higher short-term interest rates and may therefore be supportive for a currency, although in a short-term. Nevertheless, a longer-term inflation will eventually undermine confidence in the currency market.