Of course, some of these economic factors are more important than others in terms of currency prices. Some will pass with scarcely a ripple on the surface of the market. Others have the power to shake the forex market by its roots and overturn even the biggest trends. So which are the ones that you must keep track of for your forex forecasts? Here we list the 7 top fundamental indicators for the currency market.

1. Interest rate

An interest rate change in any of the major financial powers (USA, Britain, Japan, Germany, etc) can have a huge effect on currency prices. Even if you are trading a pair that does not include that particular currency, you are likely to see a knock on effect. Interest rates are the biggest driving force for the forex market.

This is because the interest rate is one of the strongest and fastest indicators of a country’s economic performance. Investors are looking to invest in countries with a strong performance, so a rise in the interest rate will immediately attract investors. This affects currency prices because they must in effect buy that country’s currency in order to invest in its stocks. It will also, clearly, affect the currency of other countries where they will selling investments in order to buy into the new strong country.

Interest rate changes in turn are driven by other factors which the central banks will watch in order to decide whether a change in the interest rate is needed. This means that instead of waiting for the interest rate to change and affect the market, you too can watch these other indicators and formulate your own forex forecasts from them. The remaining 6 factors will all be used by central banks as indicators of a country’s performance.

2. Consumer Price Index or CPI

A high index (high prices) reflects a strong economy.

3. Producers’ Price Index or PPI

This is the cost of materials for manufacturers etc. When these rise, the price rises will be passed on to consumers, which leads to a higher CPI (inflation) and perhaps a rise in the interest rate.

4. Gross Domestic Product or GDP

The GDP is like the accounts sheet of the whole nation. Results are reported every quarter and economists generally take this as the strongest indicator of the nation’s economic performance. Again a high GDP may be a signal that interest rates could be rising.

5. Payroll Employment

National payroll figures are a measure of the employment situation in the country. This index is also high when the economy is strong.

6. Retail Sales

This figure records the total receipts of retail stores in the nation, indicating consumer spending and confidence.

7. Durable Goods Orders

This is a measure of the value of orders placed with manufacturers.

So increases in all of these factors will indicate a strong economy and probably strong currency values. Do be aware, however, that sometimes a result may be announced which is less of a rise (or fall) than the market expected. This applies particularly to GDP and interest rates. In this case the market will have moved in anticipation of the change, and when the announcement comes and is less of a change than expected, it could cause a backlash. So even if you watch the indicators, forex forecasts can sometimes catch you out.

Currency Trading Information Web Site

You do not necessarily need to be able to predict the news and you do not have to spend hours studying statistical returns in order to work out what the next financial currency trading information news report is likely to mean. Of course if you can do that, you could have a massive advantage in the foreign exchange market, but most of us are not interested or knowledgeable enough to make best use of our time in this way. Forex trading from the basis of fundamental analysis is not the preferred choice of the average retail type of forex trader like you and me.

Currency Trading Information News

But even if you prefer technical analysis, relying on charts and indicators for your predictions of price movements as most retail traders probably do, you should not ignore the economic and general news. It is still important to know what is happening in the world and when.

In fact, the less you know about economics, the more important it is to be aware of the currency trading information news calendar so that you can keep well out of the market at the time when major news is about to break.

There is a very good resource at the Forex Factory news web site which gives an overview of the currency trading news economic calendar for free and provides current currency trading information. as well as a diary of future currency trading information news releases.

Since the forex market involves countries from all around the world that are in many different time zones, you can be sure that there is something happening somewhere pretty much any time of day or night. However, some of these events are more significant for price movements than others. Because of the importance of the US dollar in the forex market, all traders need to watch for major announcements in the USA. Even if you trade a cross pair such as EUR/GBP you could be affected by some unexpected currency trading information and you really do need to know the latest currency trading information news.

Then of course you need to watch the announcements in any country whose currency you are trading. So for example if you are involved in EUR/GBP and EUR/JPY, you need to keep in touch with announcements across Europe and Japan as well as Britain and the USA.

Up To Date Currency Trading Information

Fortunately, it is very easy to keep yourself up to date with currency trading information. Many brokers offer forex news alerts and similar services. You can also find these elsewhere on the internet. You can consult a forex calendar to check when the next major financial results or announcements are due. You can transfer this to your own desk calendar or sign up for a service that will send alerts to your desktop.

In fact, if you are interested in finance and economics this type of information can be addictive. You may find yourself surfing through blogs and forums for a large part of each day. So do not take it too far. Remember, the whole aim of keeping up with currency trading news is to allow you to actually get online and trade armed with the information that has been gathered from the currency trading information news feeds.

Should you be serious about being profitable using forex currency trading, you will have to know the best time to trade foreign currency. Oh and if you are not focused on the idea, you probably should not be becoming involved at all.

Trade Foreign Currency: Trading Hours

Forex currency trading is not without risk and there are lots of things that you need to know before you start forex day trading for real. Generally the best plan for a beginner is to get in to the practice of forex trading during a number of the busiest periods. You should not look for quiet times hoping to make a big break when nobody else is about. It just does not occur like that and you might be caught out.

Better to go along with the crowd at the same time when you can be more certain of being matched at a good price for both your opening and closing deals.

The answer is the overlap between the London and New York forex trading hours. London is actually the busiest currency trading floor, with New York second. London business hours are good for trading on the euro, British pound and Swiss franc, since most of the major countries using these currencies are within one hour time difference from Britain.

New York of course is the home of the US dollar, the most traded currency, and the time zone also covers Canada. Expressed in British time (the same as UTC in winter), trading starts in London at 8.00 am and finishes at 4 pm, while trading in New York starts at 1 pm UTC and finishes at 9 pm. Therefore the overlap is from 1 pm to 4 pm British time. Expressed in New York time (EST), the overlap is from 8 am to 11 am. That is when the forex market is busiest on practically every day.

Trade Foreign Currency: Time Zones

Of course those hours may not be ideal for everybody. If you live in one of those time zones and want to trade foreign currency outside of normal business hours when you may be working another job, you will certainly have the opportunity.

If you live in Europe you can trade in the evening when the New York market is still open, and if you live in the EST time zone you may find a busy time for that pair based on the business hours of their two countries.

For example the AUD/JPY pair can be reasonably busy during the Asian session when Australian and Japanese business hours overlap. However, even on these pairs there is usually more activity if you can also overlap with US or British trading times. Long term traders who may leave a trade open for several days or weeks will be less constrained by the peak trading times. For day traders, however, it is important to be able to slip in and out of a very busy market if you want to profit from forex scapling strategies. So it is also important to take into account how you plan to trade foreign currency.