Forex Fundamental Analysis What is Forex Fundamental Analysis?

 

Forex Fundamental Analysis

What is Forex Fundamental Analysis?

Macroeconomic Indicators

These are fundamental indicators which directly or indirectly point towards a weak or strong economy.

Macroeconomic indicators based on the Gross National Product (GNP) and the Gross Domestic Product (GDP) are used to estimate an economy’s efficiency.

This data is then released in reports which have major effects on a country’s currency. Aside from GNP and GDP, some of the major macroeconomics are:

• Unemployment rate
• Bankruptcies
• Retail sales
• Consumer leverage ratio

Geopolitical Events

These types of events have direct or indirect consequences, either worldwide or for a particular set of countries.

Geopolitical events have great psychological and emotional consequences for the equity and currency markets.

A few examples of such events including:

• Trade wars between major countries or economies which arise due to rising tensions among nuclear-armed, powerful countries.
• Major decisions taken by OPEC (Organization of Petroleum Exporting Countries), which have direct effects on oil prices.
• Major events like Brexit, which trigger volatility into worldwide stocks and currency markets.

Gross Domestic Product and Inflation

Gross domestic product (GDP) is a financial economic indicator which measures the total value of goods and services produced in a country, over a designated period of time.

The GDP is one of the most important indicators, and is used to evaluate a nation’s overall economic health. Construction costs, government outlays and investments all contribute to a country’s overall GDP. Inflation is an economic indicator that measures the increase of a country’s prices for major goods and services.

The rate at which prices are rising dictates the rate at which the purchasing power of the currency is falling. In order to maintain a smooth economy, central banks aim to limit inflation and avoid deflation.