When trading Forex, there are a few very important aspects that must be considered before executing a trade. One criterion is the analysis of economic data, also known as fundamental analysis. Keeping abreast of the economic news is necessary as in Forex, you are trading on the expectation that a country’s currency may rise or fall due to how robust that country’s economy is. Several important indicators to keep track of include: employment, real estate/housing markets, manufacturing production(which also includes auto manufacturing output), trade balance, FOMC rate decisions. There are many others that do have an impact(some minimal in comparison to others) but the ones previously mentioned take somewhat of a precedence above the rest. These indicators drive the foreign exchange(Forex) markets significantly. When you know what is going on in the economy, you can, for instance, predict when the real estate market will begin to recover. Understanding and recognizing the boom and bust cycles can be critical pieces of information when it comes to investing not only in real estate, but also the stock market.
Highlights from today’s economic news:
U.S. unemployment rate soars to a 26-year high(previous high dates back to October 1982) in January to 7.6 percent. Approximately 598, 000 jobs were lost last month, a 35-year high, the 5th highest loss in recorded history.
U.K. manufacturing production fell for the 10th month straight, 2.2 percent from November, the worst in nearly 30 years. Yesterday, the Bank of England(BoE) cut its benchmark interest rate to 1%, down 50 basis points from 1.50% from last month.
Canada’s economy loses 129,000 jobs in January, greatest loss in over 30 years. The country’s unemployment rate rose by 0.6 percent to 7.2%.
My thoughts: As you can tell, the outlook does not look very promising on the whole. Unemployment rates are climbing dramatically by the month, homes are foreclosing left and right, businesses are shutting their doors, and the banks and stock markets are in turmoil. Here in the U.S., we’re looking forward to the stimulus bill to be passed as soon as possible so we can begin rebuilding our economic infrastructure. Now, we’re just waiting, time will tell but let’s not despair(even though it’s pretty hard not to in this deepening global crisis). Easier said than done, I know.
Hope you all have a good weekend, economic disheartenment aside. 🙂