Fundamental analysis by trading on Forex | part 2

 Economics for fundamental analysis

For fundamental analysis on Forex, just as on any goods market, traders use the information from analytically reviews of specialists published in newspapers as well as charts and tables of many numerical indicators serving this purpose. All fundamental indicators are generally released on a monthly basis, except for the Gross Domestic Product and the Employment Cost Index, which are

released quarterly (See below). All economic indicators are released in pairs. The first number reflects the latest period. The second number is the revised figure for the month prior to the latest period. For instance, in July, economic data is released for the month of June, the latest period. In addition, the release includes the revision of the same economic indicator figure for the month of May. The reason for the revision is that the department in charge of economic statistics compilation is in a better position to gather more information in a month's time. This feature is important for traders. If the figure for an economic indicator is better than expected by 0.4% for the past month, but the previous month's number is revised lower by 0.4%, then traders can draw a justified conclusion about the economy’s situation. Economic indicators are released at different times. In the United States, economic data is generally released at 8:30 and 10 AM ET. It is important to remember that the most significant data for foreign exchange is released at 8:30 AM ET. In order to allow time for last-minute adjustments, the United States currency futures markets open at 8:20 AM ET.

Sources of information. Information on upcoming economic indicators is published in all leading newspapers, such as the Wall Street Journal, the Financial Times, and the New York Times; and business magazines, such as Business Week. More often than not, traders use the monitor sources—Bridge Information Systems, Reuters, or Bloomberg — to gather information both from news publications and from the sources' own up-to-date information. Separate groups of fundamental indicators are considered below in accordance with a generally accepted classification.

Economic indicators

The Gross National Product (GNP) measures the economic performance of the whole economy.

This indicator consists, at macro scale, of the sum of consumption spending, investment spending, government spending, and net trade. The gross national product refers to the sum of all goods and services produced by United States residents, either in the United States or abroad.

The Gross Domestic Product (GDP) refers to the sum of all goods and services produced in the

United States, either by domestic or foreign companies. The differences are nominal in the case of the economy of the United States. GDP figures are more popular outside the United States. In order to make it easier to compare the performances of different economies, the United States also releases GDP figures.

Consumption Spending is made possible by personal income and discretionary income. The

decision by consumers to spend or to save is psychological in nature. Consumer confidence is also measured as an important indicator of the propensity of consumers who have discretionary income to switch from saving to buying.

Investment (or gross private domestic) Spending consists of fixed investment and inventories.

Government Spending is very influential in terms of both sheer size and its impact on other economic indicators, due to special expenditures. For instance, United States military had a significant role in total U.S. employment until 1990. The defense cuts that occurred at the time increased unemployment figures in the short run.

Net Trade is another major component of the GNP. Worldwide Internationalization and the economic and political developments since 1980 have had a sharp impact on the United States' ability to compete overseas. The U.S. trade deficit of the past decades has slowed down the overall GNP. GNP can be approached in two ways: flow of product and flow of cost.