Chapter 6 – Fundamental News 101 (Part I)

Other news releases related to the economy are:

Newsletter

Zero spam.

Non-Farm Payroll (or Employment Changes) – Measures the change in number of employed people during the previous month, excluding the farming industry. A rising trend has a positive effect on the nation’s currency. Job creation is an important indicator of economic health because consumer spending, which is highly correlated with labor conditions, makes up a large portion of GDP. This report is the first of the month that relates to labor conditions, making it susceptible to big surprises.

Different countries, other than the U.S.A., call this news release as Employment Changes or Employment Rate. But they are pretty much the same thing. The NFP is however, one of the most volatile news release for the Forex Market. Other news releases related to the Employment are Unemployment Rate and the weekly Jobless claims.

3rd Party Advertisement
HIGHER
EMPLOYMENT CHANGES
= HIGHER GDP = HIGHER CURRENCY
VALUE
         
   

OR

   
         
LOWER
EMPLOYMENT CHANGES
= LOWER GDP = LOWER CURRENCY
VALUE

 

Other important economic indicators are:

ISM Manufacturing Index – the Institute of Supply Management (ISM) Manufacturing Index measures the activity level of purchasing managers in the manufacturing sector, with a reading above 50 indicating expansion. A rising trend has a positive effect on the nation’s currency. To produce the index, purchasing managers are surveyed on a number of subjects including employment, production, new orders, supplier deliveries, and inventories. Traders watch these surveys closely because purchasing managers, by virtue of their jobs, have early access to data about their company’s performance, which can be a leading indicator of overall economic performance.

ISM was established in 1913 in the U.S. and has been reporting since June 1998. For the past ten years of so, ISM have established a solid track record of the validity of its reports, and they are very highly regarded. ISM also publishes an ISM Non-Manufacturing Index, which is a survey for the Service sector.

Other countries such as UK and Eurozone, have their own purchasing manager index figures (PMI), but they are all similar to one another, with 50 being the medium, below 50 indicates contraction and above 50 indicates expansion.

HIGHER
PMI
= HIGHER
GDP
= HIGHER CURRENCY VALUE
         
   

OR

   
         
LOWER
PMI
= LOWER
GDP
= LOWER CURRENCY VALUE

 

Pages: 1 2 3 4 5

About Kelvin Ching

I'm a professional Forex trader and I have been trading for over 7 years. I was a series 3 broker and a registered CTA with the NFA, the main regulatory agency in the United States, and I have been involved at the highest levels in commodity trading. I also have a background in Information Technology, graphics design, and programming... I'm the co-founder of CurrencyNewsTrading.com, a site dedicated to fundamental analysis and news trading.

Comments

  1. uwah prince ozioma says:

    will love to get more understanding on what mr wayne is saying, that’s exactly my question.thanks

  2. mr wayne says:

    if we have a better economy, we will have a higher inflation, a higher interest rate will follow, and higher currency value will be perceived.

    I dont understand this part , don’t we have bad economy is we got high inflation ??

    Also , if there is high inflation , meaning the value of the money in that country is depreciating , in order to bring the balance back , why would the interest rate be increase ? If interest rate increased means is more expensive to borrow money from the bank .

Speak Your Mind

*

Newsletter

Zero spam.