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FOREX TRADING COURSE FOR BEGINNERS

8 LEADING ECONOMIC INDICATORS THAT

EFFECT THE FOREX MARKET

One of the key tools used by successful forex traders worldwide is the economic calendar. This is
what tells them when to expect economic announcements that can have a significant impact on
forex prices across the globe. Whether in the form of hard data, reports or survey results,
economic information released by government and non-government bodies form very useful
economic indicators.

There are three main types of indicators – leading, lagging and coincident. Leading indicators help
in gaining insights about future market activity, while lagging indicators deal with events that
have already occurred. Coincident indicators focus on the current state of the economy.

All three types of indicators affect the currency market in a variety of ways. However, given the
plethora of economic information released by every single country, how do you decide which
indicators to follow?

Here’s a look at eight economic indicators that have the highest impact on the forex market.

1. Gross Domestic Product (GDP)

GDP is the most important measure of the overall health of an economy. The compilation process
for GDP takes such a long time that when it is finally released, many parts of it are already known.
So, often, expectations turn out to be quite accurate. But if there are some surprises in store,
they can have a large impact on the market.

So, despite its lack of timeliness, GDP figures help us understand where we currently are in the
business cycle.

2. Non-Farm Payroll

This is possibly the most important economic indicator for forex traders, released by the United
States Bureau of Labor Statistics, on the first Friday of every month. The reason this report has
such a significant impact on forex prices is that historically, the NFP employment data is closely
correlated to the GDP and, therefore, can be used as a timely indicator of the US GDP. In addition,
this report affects the nation’s monetary policy, given that stable prices and maximum
employment are two of the Three Monetary Objectives of the Federal Reserve.

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