Wondering why the value of a currency goes up or down?
The economic health of a country determines the value of its currency. In the Forex market, currency prices change due to several key economic indicators.
Let’s focus this discussion on the most 4 most monitored U.S. indicators which prove to move currency prices in the market.
Non-Farm Payrolls
As we have previously discussed, the Non-farm Payroll or NFP is a key economic indicator closely watched by traders in the market. The NFP report includes the number of jobs added, minus farm employees, government employees, and employees of non-profit organizations. When there’s an increase in employment rate, this indicates economic growth. The NFP report is released every first Friday of the month at 8:30 am EST.
FOMC Interest Rate Decisions
As they say, interest rates make the Forex world go around. The Federal Open Market decides on the U.S. interest rates. The committee meets 8 times yearly to decide interest rates and the growth of the United States money supply. Forex market participants anxiously wait for Fed decision before they make a move.
Trade Balance
The trade balance is a country’s exports minus its imports. If the value of exported goods exceeds the value of imported goods, there’s a trade surplus. This is favorable to the U.S. economy. But if the value of imported goods exceeds the value of exported goods, trade deficit occurs. A trade deficit is generally bad news for the U.S. dollar.
Consumer Price Index or CPI
CPI, a key gauge of inflation, is a measure of price changes in consumer goods and services. The Federal Reserve may cut rates if inflation is too low to stimulate growth. The central bank then raises its rates if inflation too high to stabilize prices.
Related: What is NFP and How to Trade it?
