The 8 Economic Factors that Affect the Forex Market

Where economic theory will affect the Forex market on a long-term basis, the affect of changes in economic data is much more immediate. Oftentimes, the biggest companies in the exchange market are the various countries that participate in market activities and there currency is likened to shares in that country. It follows then that the countrys economic data is analogous to the earnings data of a company or business entity.News and information regarding a countrys economy can have a direct impact on the direction that the countrys currency is heading in much the same way that current events and financial news affect stock prices, hence the importance of economic factors. The following eight economic factors will directly affect a currencys movements in the Forex market.Factor 1 - Employment DataNon-farm payrolls is the name given to the data that pertains to the number of people who are employed within the US economy, and it is released the first Friday of every month by the Bureau of Labor Statistics. Strong decreases in employment indicate a contracting economy, while strong increases are perceived indicators of a prosperous economy.Factor 2 - Interest RatesThis is always a major focus in the forex market. Since the central banks mandate monetary policy and supply, they are the prime focus of investors and the various market participants.Factor 3 - InflationThis is the measure of increases or decreases in pricing levels over a period of time. Due to the immense number of goods and services available in a country, usually a grouping of these goods and services are used to measure changes in the pricing. Increases in pricing indicate an increase in the inflation rate which in turn can devalue that countrys currency.Factor 4 - Gross Domestic ProductThis is the measurement for goods and services that were finished over a period of time. The GDP is broken down into 4 categories:1. business spending2. government spending3. private consumption4. total net exportsFactor 5 - Retail SalesThe measurement of sales recorded by retailers over a period of time is a reflection of either increased or decreased consumer spending, depending on whether sales are up or down for the comparative period a year ago. This indicator gives market participants an idea as to how strong or weak the economy is.Factor 6 - Durable GoodsGoods that have a lifespan of three or more years are considered durable goods and they are measured in quantities that are ordered, shipped, or unfilled over a period of time. These are also an indicator of economic spending or the lack of it.Factor 7 - Trade and Capital FlowsCurrency values can be significantly impacted by monetary flows that result from certain interactions between countries. When imports exceed exports, there is a tendency for the currency value to decline. Increased investments in a country can lead to the opposite result.Factor 8 - Macroeconomic and Geopolitical EventsElections, financial crises, monetary policy changes, and wars can influence the biggest changes in the Forex market. These events can either change and/or lead to reshaping of a countrys economy.
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About the Author (text)Justin Stewart has used software to automatically trade the forex market allowing him to earn a living without lifting a finger, even while he sleeps. You can use the same forex software to get the same results here: www.SleepingForexRiches.com