Types of Fundamental Data in Forex Trading
Fundamental data and analysis are often heard in discussing how well public companies are performing. Rarely use it in forex trading. Generally traders rely more on technical analysis and understanding the market with the help of various indicators.
In general, there are 7 types of forex fundamental news that have the most influence, namely the unemployment rate, gross domestic product (GDP), consumer inflation rate (CPI), interest rates, nonfarm payrolls, retail sales, and the purchasing manager's index (PMI).
Non-Farm Payrolls (NFP)
This report, issued by the United States Bureau of Labor Statistics, is one of the most important reports on economic activity. Most traders are looking forward to the release of this data because of its great influence on the movement of the USD currency. NFPs are generally released every first Friday of the month, and can move the price more than 100 pips.
Gross Domestic Product (GDP)
GDP data can measure the health of the economy is increasing and the currency of a country is getting stronger. Conversely, if GDP declines, it can drop currency exchange rates in the forex market. Especially if the country is in a recession.
GDP reports are generally released on a quarterly or quarterly basis. First quarter GDP data is published in April, May or June. Second-quarter GDP data is generally released in July, August, or September.
PMI (Purchasing Manager's Index)
Based on the results of a survey of purchasing managers in certain sectors in a country, PMI data is one of the most influential in forex trading, especially the manufacturing and service sectors.
Researchers will ask respondents for an assessment of business prospects in the next six months. Including recruitment or layoffs, new orders that increase or decrease, and so on. Evaluation will be carried out by observing the scores obtained. A score above 50 indicates the sector is expanding, while a score below 50 indicates the sector is in recession.
Interest rate
Changes in the benchmark interest rate determined by the central bank in the monetary policy framework also include fundamental data. In addition, other monetary policy instruments such as the program to buy or sell bonds and quantitative easing were also highlighted because they have the potential to affect the demand or supply of money.
The central bank will generally hold regular meetings once a month to determine future changes in monetary policy. Data from this meeting, including interest rates and bond sales, can boost demand for a currency and cause the exchange rate to strengthen. When interest rates are low and quantitative easing will increase the supply of currency and cause the exchange rate to weaken.
Unemployment Rate
Most countries in the world compile statistics on unemployment rates on a regular basis. Some developed countries such as the United States, Britain, and Japan publish their data every month. Data on the unemployment rate that is lower than market expectations will generally trigger the strengthening of the related currency.
Retail Sales (Retail Sales)
In this data, the total sales of goods in a sector are recorded without taking into account the services in it. This indicator is very useful for measuring the level of consumer spending. If retail sales increase, wages will rise, followed by an increase in consumption, so that the currency will also increase.
Consumer Inflation Rate
Measuring the rate of growth of the prices of goods and services in a country compared to a certain base year basis to determine the level of consumer inflation. Excessive inflation is dangerous, but a moderate level is still needed by the economy to ensure the economy continues to grow over time.
Central banks of developed countries will generally target an inflation rate of 2 percent, while central banks of developing countries generally target inflation in the range of 3-4 percent. If the inflation rate exceeds the target, the central bank will increase interest rates with the aim of controlling rising prices. However, if inflation is not achieved, the central bank will reduce interest rates to encourage price increases.
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