Many investors check the economic indicators of major countries when trading Forex. In particular, the results of US economic indicators draw attention from investors around the world who trade stocks and foreign exchange, and the exchange rate usually fluctuates significantly at midnight time at the time of announcements. Here, we will introduce the reasons why US economic indicators affect the market, and the US economic indicators that you should definitely check along with their outliers.
Why American Economic Indicators Are Important?
First, let us find out why US economic indicators are attracting attention.
- Economic trends are likely to affect other countries:
The United States is the world is leading economy by GDP (gross domestic product), the largest in the world. Since the US dollar is the key currency in the foreign exchange market, the impact of the US dollar on other currencies cannot be understated. In other words, it is no exaggeration to say that economic trends in the United States affect the US dollar and, by extension, the entire world. It will be clearly be remembered that the economic crisis of the “Lehman Shock” that started in the United States in 2008 spread its influence not only in the United States but also to the whole world.
- US dollar is the key currency:
According to the transaction volume data by currency released by the BIS (Bank for International Settlements) in 2019, the US dollar accounts for about half of the total transaction volume, and the US dollar is the economic powerhouse, therefore America has established itself as a key currency. Even in the FX market, currency pairs (dollar straights) such as the euro / US dollar and the US dollar / yen have abundant transaction volumes and a large number of market participants. However, these currency pairs are strongly influenced by US economic indicators because they are currency pairs that directly involve the US dollar. Also, cross yen such as the Euro/yen, which does not involve the US dollar, is not unrelated to the US dollar because it is made by multiplying the euro / US dollar and the US dollar yen. In some cases, the strength of each currency and the US dollar influences the fact that it is traded through the US dollar. Immediately after the US employment statistics and the FOMC (Federal Open Market Committee) announce policy interest rates, the foreign exchange market tends to move significantly and participants’ transactions tend to become more active. This is the reason why American economic indicators are attracting attention and being emphasized in a major way.
List of major US economic indicators
There are various economic indicators in the United States, such as consumption-related, employment-related, and corporate activity-related. Here is a brief list of major US economic indicators.
|Employment-related||US Employment Statistics||Highly important in the monthly employment situation index released by the Labor Statistics Bureau (BLS) of the US Ministry of Labor|
|ADP Employment Statistics||ADP, which operates a payroll service in the United States, releases monthly indicators on the number of employees in the private sector.|
|Financial policy||FOMC Statement / Minutes||After the end of the Federal Open Market Committee (FOMC), the views of the entire committee will be presented in a statement, and details such as what was discussed three weeks later will be published in the minutes.|
|Federal funds rate (FF interest rate)||The interest rate targeted by the Federal Reserve Board (FRB) to guide monetary policy at the FOMC, which is the actual US policy rate.|
|Business-related||Gross Domestic Product (GDP)||The U.S. Department of Commerce’s Department of Economic Analysis (BEA) announces quarterly, divided into preliminary, revised, and final figures.|
|The U.S. Department of Commerce’s Department of Economic Analysis (BEA) announces quarterly, divided into preliminary, revised, and final figures.||An index showing business sentiment calculated monthly by the American Supply Management Association based on the results of a questionnaire by corporate purchasing staff.|
|Trade-related||Trade balance||One of the items of the current account balance is the difference between the export value and the import value in trade shown in the trade statistics (customs clearance basis) released monthly by the Economic Analysis Bureau (BEA) of the US Department of Commerce.|
|Price related||Consumer Price Index (CPI)||The inflation rate index released monthly by the US Department of Labor Statistics Bureau (BLS)|
|Consumption related||Retail sales||Monthly indicators of retail sales in various forms released by the US Department of Commerce’s Census Bureau|
|Personal Consumption Expenditure (PCE)||A monthly indicator of personal spending on goods and services released by the U.S. Department of Commerce’s Department of Economic Analysis (BEA)|
|Consumer Confidence Index||An index showing the future of personal consumption released monthly by a private research company in the United States based on a questionnaire survey|
|Manufacturing related||Indices of industrial production||Federal Reserve Board (FRB) monthly indicators of production trends, primarily in the mining and manufacturing industries|
|Housing-related||Number of housing starts||U.S. Department of Commerce announces monthly number of new homes that have started construction, an indicator of the economic outlook|
|Number of used homes sold||The National Association of Realtors announces monthly sales of pre-owned homes, an indicator of the economic outlook|
The economic indicators of the United States
The economic indicators of the United States, which can be said to be the center of the world economy, are important, and we have introduced the kind of economic indicators available. You can see that economic indicators are one of the important factors that move the exchange rate in the foreign exchange market. It is important to understand the characteristics of economic data and its meaning when trading Forex, and there is no doubt that the range of trading can be expanded by formulating a strategy through fundamental analysis. Those who like technical analysis may also have trading tips by looking at economic data as an element of the market.