An economic indicator is a public report or release of financial data that gives insight into the strength of a nation’s economy. There are many economic indicators for every country. Some economic indicators, such as GDP, are universal in that nearly every country releases some form of GDP report. Others, such as the housing starts report or producer price index, can be calculated differently (and named differently) depending on the country.
Economic indicators are vital to the forex market. In the end, a nation’s currency derives its value from the health of that nation divided by the amount of currency it has issued. Economic indicators allow forex traders to track any changes in the health of nation’s economy. For example, an increase in unemployment or a decrease in GDP can be a sign that a nation’s economy is headed for a rough patch that may affect the value of its currency. Depending on the overall situation, economic indicators can be leading or lagging. Leading indicators give traders advanced warning of bigger changes in a country’s economic prospects and lagging indicators usually act to confirm the direction of these changes.
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