Fundamental Analysis

What is Fundamental Analysis

Fundamental analysis is an assessment of the economic conditions of a country, in order to forecast future price movements on the Forex market.

List of Main Economic Indicator

Consumer Price Index - CPI

The consumer price index is the most widely followed indicator of inflation. Inflation is an increase in the overall prices of goods and services. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. For monetary policy, the central bank generally follows "core" inflation — inflation excluding volatile food and energy components — that gives a more stringent measure of general prices.

Market Impact:

Gross Domestic Product — GDP

GDP represents the total value of the country's production during a specified period and includes consumption, government purchases, investments and trade balance. It's usually measured on a yearly basis and a quarterly basis.

Market Impact:

Employment Indicators

Employment indicators reflect the overall health of an economy or business cycle. In order to understand how an economy is functioning, it is important to know how many jobs are being created or destructed, what percentage of the work force is actively working, and how many new people are claiming unemployment. For inflation measurement, it is also important to monitor the speed at which wages are growing

Industrial Production

It's a measure of the change in the production, that usually includes the manufacturing sector, mining and utilities. The manufacturing sector usually accounts for less than 20 percent of the economy, but most of its cyclical variation. This report has an important influence on market behavior.

Market Impact:

PMI/ISM Manufacturing Index

The manufacturing ISM report on Business, released in the U.S. is based on monthly data compiled from surveys carried out amongst purchasing executives. The PMI index released in the Euro zone and UK — is instead a composite index based on five major indicators including new orders, inventory levels, production, supplier deliveries and employment. A Pmi/Ism index over 50 indicates that manufacturing is expanding, while below 50 means that the sector is contracting. These two reports are very important indicators for the financial markets.

Market Impact:

Producer Price Index — PPI

The producer price index measures a monthly fixed basket of goods by stage-of-production, industry and commodity.
This index measures prices at the producer level before they are passed along to consumers. Since it includes goods being produced, this index is often a good forecast of future CPI releases.

Market Impact:

Retail Sales

This indicator tracks the merchandise sold by companies within the retail trade and measures the total consumer spending on retail sales. This is a very important market mover it's usually used as a gauge of consumer activity and confidence, because Consumer spending accounts for more than two-thirds of the economy.

Market Impact:

Housing starts

This indicator measures how many new single-family homes and other residential buildings were constructed over a period; many analysts consider it a sort of leading indicator, because declining housing starts could show a slowing economy.

Market Impact:

Trade Balance

This economic indicator measures the difference between the value of goods and services that a country exports and those it imports; this is also the largest component of the balance of payment. Imports usually act as a drag on domestic growth while exports boost domestic production. There is a trade deficit when a country imports more than it exports. This is an important market mover.

Market Impact:

Factory Orders

This economic report represents the level of new orders for both durable and nondurable goods and tells investors what to expect from the manufacturing sector, a major component of the economy.

Market Impact: