Economic indicators and how they affect the forex market

There are many economic indicators that directly affect currency prices in the forex market, including the GDP index, the unemployment rate index and the interest rate, in addition to the CPI consumer price index, which is a measure of the price of products that are consumed by individuals.

Economic Indicators

Economic Indicators

 

1- Gross Domestic Product Index GDP:

One of the most important economic indicators that directly affect the national economy of a country, and therefore its economic position and currency, and this would affect the movement and strength of its currency in the trading market. Which are produced in a certain period of time, and it turns out to us that there is a direct relationship between the gross domestic product and the level of improvement in the state’s economy, the higher the value of the gross domestic product, the more it will be in the interest of this country as well as the economic improvement in it and vice versa if the value of the gross domestic product is less.

2- Inflation rate:

It is considered one of the most important economic indicators. Inflation reflects the rise in the general level of prices, and consequently the weakening of the purchasing power of the currency and the increase in the price of a particular commodity, the purchasing value of which becomes less. In addition, inflation mainly affects the economy, and this would affect the currency trading market because of its strong correlation in currency value.

3- Consumer Price Index CPI:

It is the index that measures the price of products that are consumed by individuals, including the prices of the main necessary consumables. So, the relationship is direct between the CPI and the value of the currency. Against other currencies in the trading markets.

4- Interest rate

It is the interest value on the money that is offered to investors, also known as the interest rate, and it is one of the most important tools that the central bank has in order to control the value of the currency, in addition to the forces of supply and demand that mainly control interest rates. To increase or decrease the interest in order to attract or give up the investors to sell or buy the currency according to its interest rate, if the relationship is direct between it and the value of the currency.

5- Trade balance

One of the important economic indicators, which measures the difference between the value of imports in a country, during a certain period, and the value of its exports. The volume of exports was more than the volume of imports, so there is a direct relationship between the trade balance and the value of the currency. The greater the trade balance, the more the economy improves, and therefore the value of the currency increases, and vice versa if the value of the trade balance weakens in that country.

6- Unemployment rate

It is the ratio of the unemployed to the total population in a country, and the unemployment rate indicator is one of the most important indicators in the economic cycle of that country. The relationship is inverse between the unemployment rate and the currency value of that country. The higher the unemployment rate, the more this would affect the economy negatively. , and therefore the value of the currency decreased, in addition to that, it will be reflected on the movement of currency pairs in the trading market in the event of any change in the resulting unemployment rate.

Mohamed Abdel Khaleq
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