Macro Indicators and Their Hidden Influence on Forex Markets

Macroeconomic indicators are force to be reckoned with when it comes to forex trading. Typically regarded as dry stats, these indicators can actually provide invaluable insights into a country’s economy, and play a big role in the valuation of currency, whether many traders realize it or not. Of course, most traders are focused on the technical analysis and chart patterns, but it is very important to understand macro indicators in order to understand the bigger picture, and to make informed trading decisions.

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GDP or Gross Domestic Product is one of the most important macro indicators that the traders continue to monitor. A country’s GDP is a key measure of economic health and is defined as the total value of goods and services produced within the country. If GDP is rapidly growing, then this typically means the economy is well and therefore gives investors a reason to be more hopeful as well. These, in turn, lead the currency of that country to appreciate. However, if we have bad news on GDP side, this can be seen as an indicator of economic problems and therefore can put some pressure on the currency to weaken. While subtle, they can be very powerful and cause longer term trends that smart traders can profit off of.

Another macro indicator that has a big impact in currency movement is inflation. An extremely central wrangle that all central banks are bound up in is inflation and rise in inflation rate is bound to erode purchasing power and unsettle economies. When there are high inflation rates, central banks often raise interests to cool the economy which thereby strengthen a national currency. Conversely, a central bank might drop interest rates should inflation be low, and weak the currency as a result. Traders who know how inflation influences currency fluctuations in regards to central bank policies can expect currency fluctuation and make smarter trading decisions.

When it comes to monitoring macroeconomic indicators, such as GDP and inflation, MetaTrader 5 for Mac is a great choice. Traders can keep up with recent releases from governments and central banks with real time economic calendars and news feeds that you can customize. In addition, traders on MetaTrader 5 for Mac are provided with powerful charting tools for the analysis of how macroeconomic events show an impact on price action. Traders use a mixture of technical and macro indicators to increase their view of the market.

One more important indicator that could indirectly influence the forex market is employment data. Unemployment data, particularly unemployment rates and job creation, and wage growth informs everyone on the health of the labor market, and, indirectly, the overall economy. Usually, strong jobs report means appreciation of national currency as it means that economic growth is taking place and consumers shall spend more. On the contrary, if unemployment is high, it shows that the economy is not in good condition and hence, the currency will be weak.

Currency movements are also determined by trade balances, or the gap between a country’s exports and imports. Countries with a trade surplus, or that export more than they import, can boost a currency, while a trade deficit that creates a weaker currency. As many traders take advantage of price change due to global demands, it is essential to know a country’s trade relationship and how it affects the currency.

Forex traders can better understand the market trends by appreciating how these macroeconomic indicators relate to one another. With MetaTrader 5 for Mac being easier than ever to track, traders finally have the tools they need to make data driven decisions and react quickly to changing market conditions. Traders who have a good understanding of macro indicators also have a means to fit into the full potential of the forex market by having better strategies.

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Sumit

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Sumit is Tech blogger. He contributes to the Blogging, Tech News and Web Design section on TechnoSpices.

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