Fundamental Analysis Characteristics
One of the most significant and difficult analysis of the foreign exchange market fundamental analysis is. It helps to predict the changes of exchange rates, as well as the general economic situation in the world and individual countries. Course of currency price is reliant on several factors, they are: political, economical factors and act of providence.
The basic economic factors maintain:
Gross National Product defines the level of the economy totally. This variable is the sum of consumer expenditure, investment, government spending and net trade. Definition of this variable is based on the amount of all commodities and services produced domestically and outside the country.
The Gross Domestic Product is the sum of all goods and services produced by both domestic and foreign companies
Consumption Spending index demonstrates a tendency of consumers to redirect from savings to consumption.
Industrial Production Index is a significant economic indicator, showing the strength of the economy and indirectly - strength of currency. Traders often use this indicator as a a potential sign for making trading decisions.
Capacity Utilization Index characterizes the cumulative industrial output which is belonged to the total production capacity. Effectiveness of use this index shows that a high degree of capacity utilization foregoes inflation and raises foresight that the central bank will raise interest rates to prevent or reduce inflation on the foreign exchange market.
Factory Orders Index demonstrates the total orders for remote and short-duration goods.
Durable Goods Orders index covers only those commodities, the term of exploitation of which is more than 3 years, they can be cars, jewellery, furniture and etc. This variable is significant for the currency market because it shows an indication of consumer confidence.
Business Inventories indicator is based on the cost of products produced and placed in storage for following sale. Impact on the market is limited.
Indicators of real estate development. The size of real estate development in the range from half to two million units shows a strong economy, while a figure about one million units is a testament of the economic downturn.
Another significant fundamental factor is the rate of inflation, because interest rates directly depend on it.
Consumer price index displays the average change in retail prices for a fixed basket of commodities and services.
Both indexes are applied by traders as an adjuvant in the assessment of inflationary activity.
Gross national product implicit deflator and Gross domestic product implicit deflator are announced quarterly, they are regarded to be the most important measuring mechanisms of inflation.
The political factors include the parliamentary elections, the conclusion of trade agreements. The force majeure includes political crises and etc.
Article Source: FxTradingStock.com
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by: Dmitry Vasenyov
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Date: Mon, 20 Dec 2010
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