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What are Economic Indicators?
Economic indicators are just snapshots of how a country and various economic and financial parts of it are doing. It provides numerical data compiled by various governmental agencies as also provided by the private sector.
These numbers are very important as they give a clear indication of the health of the economy and which way it is headed. No wonder then, that almost everyone with a stake in the financial markets monitor this data so religiously.
Since there are so many people spread all over the world ready to react to any changes or report of the economic indicators, they have great potential to cause massive volumes of transactions and movement in prices.
You therefore need to understand clearly what indicators you should be looking at closely, what they mean and how any change in them will affect the currencies.
Finally you need to know how to use this knowledge to make wise trading decisions.
What are the Major Economic Indicators?
Traders in any financial market use economic indicators as a useful measure of the country's health. However, not all economic indicators can affect currencies and not all can have an impact to the same degree. It is important to identify the key economic indicators that can affect a country's currency:
- Gross Domestic
- Industrial Production
- Produce Price Index
- Consumer Price Index
- Purchasing Managers Index
- Employment Cost Index
- Durable Goods Orders
- Retail Sales
- Housing Starts
Economic Indicators are essentially of two kinds:
Leading indicators that start to change even before the economy is showing any trend and are used to forecast any upcoming changes in the economy.
Lagging indicators start to change only after the economy is showing a particular trend and so are used to confirm the changes in the economy.