US Economic Data Impacting The Forex Market – Part 1

The US and all other major countries release economic data on a daily basis that affects the forex market. The types of data released and how they affect currency pairs are described below:

• Non-farm payroll and employment report: The U.S. government releases this report on the first Friday of every month, indicating the strengths/weaknesses of the economy. The report is divided into two parts: the first part deals with job creation and the second gives the unemployment rate in the country. Strength shown on this report is directly proportional to the value of the US dollar in the forex market.
• Data on the US Gross Domestic Production (GDP): The US GDP report signifies the speed at which economic activities are growing/shrinking in the US, which is equal to the total amount of goods and services produced in the US during a particular period. Similar to the non-farm payroll and employment report, the GDP report indicates the strengths/weaknesses of the US economy and a positive GDP report means that the US dollar will appreciate with respect to other currencies that exist in pairs with it.
• Production Indices: These indicators measure supply side inflation and indicate an increase/decrease in production costs of goods and services at the national level. Since production cost is transferred to the end consumers, higher production cost means higher inflation and vice versa. The three main production indices are:
• Producer-Price Index (PPI): measures inflation related to the production of goods and services. It quantifies production costs.
• Purchasing Manager Index (PMI): measures overall conditions of the US manufacturing industry over a period of time. A PMI increase means that the condition of manufacturing in the US is good and vice versa.

This is first in the five part series. Read more..