Economic reports are the backbone of any trader’s playbook.
Gross domestic product (GDP) may be the most visible economic statistic, as it is the baseline of a country’s economic performance and strength. GDP measures the total output of goods and services produced within an economy. However, it is crucial to remember that GDP is a lagging indicator. That means it reports on events and trends that have already occurred.
Inflation is also a significant indicator, as it sends a signal of increasing price levels and falling purchasing power. However, inflation is a double-edged sword. Many view it as placing downward pressure on a currency due to retreating purchasing power. Inflation can also lead to currency appreciation, as it may force central bankers to increase rates to curb rising inflation levels. Inflation is a hotly-contested issue among economists, and its effects on currencies are rarely straightforward.
Employment levels, retail sales, manufacturing indexes, and capacity utilization also carry important information on the current and predicted strength of an economy and its currency. They can provide confirmation for the primary factors we’ve outlined above.
One of the most highly anticipated monthly economic news event is the nonfarm payroll (NFP) report. It is a key economic indicator for U.S. and represents the total number of paid workers in this U.S excluding those employed by farms, the government, private households, and nonprofit organizations. The NFP reports are released on the first Friday of every month.