When you are trading currencies, the value of a country’s currency is affected and largely influenced by large number of factors that are called economic indicators e.g. employment data of the country, economic growth, export and import, political stability and more. Economic indicators reflect how a country is performing and what the likelihood of growth is. Thus, macroeconomic factors play a vital role in predicting the value of a national currency.
Why Should You be Aware of Economic Indicators
Trading Forex becomes easy when you are aware of the leading economic indicators; therefore, be always ready to read and interpret reports as these are released by the governmental or non-governmental bodies.
Updating yourself with the latest information on the national economies helps you decide on the currencies you wish to trade in. The forex traders who are on a long position are caught flat-footed when negative economic data release that resulted in the currency they were trading in to fall in value; this happened because they lacked the latest data on the national economy of the currency they were trading in.
However, as a trader you should know what the economic data to look out for as not all data is vital and can be useful. It goes without a doubt that as data mounts one after another, you are confused which data to use for trading and which to discard; however, when you subscribe to a newsletter from a reliable online portal, you get only the streamlined data that is meant for your assistance. The data is collected and refined to meet the requirement.
You can get employment data from the governments as these are released every now and then. Similarly, you can know about the national economic growth in the form of reports for GDP, GNP, Per Capita Income, etc. These reports are compiled by the national bodies as well as international organizations too; to get a clear picture, you need to analyze the data from various sources.
Traders should also obtain information on the monetary policies by a country’s central bank and the important monetary authorities like the European Central Bank (ECB), Federal Reserve (Fed), and the Federal Open Market Committee (FOMC).