Regulators and many governmental agencies release important data revealing the state of the economy. These releases influence the prices of currencies. As a beginner you should know at least following economic indicators discussed by Yee Kok Siong an arbitrageur and a forex investor. Sometimes they cause hundreds of pips of move. So you should know when they come out and is it wise to trade or just sit on the sideline.

The Impact of Employment

One of the important economic indicators you should keep your eyes on is non form payroll popularly known as NFP. US Department of Labor releases this data monthly on the first Friday. It gives the number of jobs added or lost during the last month. It indicates how the US economy is doing. An increase in the jobs indicates the healthy state of US economy and more and more consumers increase their spending. It is a propellant of growth. Strong data is good for US dollar.

An Indicator of Inflation

One of the economic indicators influencing the currency market is consumer price index. It reports the change in value of goods and services and hence a good indicator of inflation. Constantly increasing CPI indicates that the living has become costly which effectively means lesser savings. In response to this inflation, central banks increase the interest rates. Decreasing CPI means deflation which can force central bankers to reduce the interest rates. A cue for interest rate policy can be taken from the CPI data. It is considered important by everyone in the currency market. Positive CPI is good for the currency while negative data is considered to be depreciative. CPI for last month is released around 20th of next month.

The Strength of Economy

Gross domestic product is one of the economic indicators which gives you comprehensive view of the economy. GDP is the value of goods and services produced in the country. GDP is referred by the policymakers to make important decisions. It is a critical data. A good GDP number implies increased production and more revenue. It strengthens the currency of the country. It is usually announced on the last Friday of every quarter.

An Indicator of Trades

Of the economic indicators tracked, trade balance report is a vital data watched by traders around the world. Demand and supply determine the price of currency. Supply and demand of the currency depend on the trades happened with that country. If the goods and services produced in a country are popular in other countries then to facilitate the trade, the demand for the currency of that country will increase appreciating its value. The difference between export and import is revealed by trade balance report. If the data is positive then it is good for the currency. Negative data will depreciate the currency. US release the trade balance report every month.

The State of Manufacturing Sector

Purchasing managers index is one of the economic indicators which is of immense importance. It indicates how the manufacturing sector is doing. PMI gets its value from five different indexes namely new orders, inventory, production, supplies and employment environment. PMI is reported monthly on the first business day. PMI above 50 indicates the expanding economy and appreciates the value of the currency. On the other hand, a reading below 50 indicates the contraction and depreciation of the value of the currency.

Every player in the financial world gives strong attention to economic indicators. They move the markets considerably and hence provide excellent trading opportunities. They are very easy to understand and follow. With practice you can trade in such time and handle the volatility to your advantage successfully.