US Economic Data Impacting The Forex Market – Part 4

In the previous part, you read about some economic data points that play a crucial role in the movement of currency pairs. Some other data points are:

Budget Statement Monthly: is a monthly report showing the US budget deficit/surplus and is published by the Treasury Department of the US government. This report also provides statistics related to tax collection, which is an indicator of the country’s economic activity. Budget Statement Monthly is important from the forex market’s point of view, since the budget deficit/surplus determines the level of currency (US dollar) that would be issued by the country’s government, and the availability of the US dollar in the market determines its price, and in turn the prices of the currency pairs it constitutes. For example, if there is a situation of budget deficit, the US government will issue more US dollars to solve the deficit problem, which will result in higher availability of the currency in the market than its demand, driving down its price and the price of currency pairs in which the US dollar is one of the currencies.

Leading Indicators’ Composite Index: is published by the Conference Board (a non-profit global business organization) to predict whether the US economy will witness an uptrend or a downtrend in the coming months. The general condition of the economy (and therefore, the forex market, since the US economy impacts the forex market to a large extent) can be forecasted by analyzing this index in the light of business cycles and general economic conditions. This index is of medium importance since many of its 10 economic components are already known when it comes out on the 20th of each month. Its 10 components are:
• Average weekly hours worked by manufacturing workers.
• Average number of initial applications for unemployment insurance.
• Amount of new orders for consumer goods and materials seen by manufacturers.
• Speed of delivery of new merchandise from suppliers to vendors.
• Amount of new orders for capital goods unrelated to defense.
• Amount of new building permits for residential buildings.
• The S&P 500 stock index.
• The inflation-adjusted monetary supply (M2).
• The spread between long and short interest rates.
• Consumer sentiment.

Current Account: This quarterly report is released by the Bureau of Economic Analysis (BEA) and measures the difference between net exports and net imports of a country, excluding financial assets & liabilities transactions. It is an indictor of international trade between different countries and, therefore, substantially impacts the forex market.

Gross Domestic Product (GDP) Price Deflator or GDP Implicit Price Deflator: The importance of this report for the market is medium because it reflects only the change in the base year’s GDP, based on changes in the price level. BEA generally releases it on the last day of the quarter.

Initial Jobless Claims: This report is published by the US Department of Labor and once every week on Thursdays. It quantifies the number of first timers who have applied to receive unemployment allowance. This is short-term weekly data and is, therefore, of low or medium importance to the market.

Read more..