Economic Reports

Economic reports are released at scheduled times each day and have a marked effect on currency exchange rates. The results of these reports provide traders with an indication of the overall health of a nation's economy.

These reports affect the currency market in much the same way as earnings reports and other corporate press releases affect stock prices. In forex, as in the stock market, any deviation from the expected result of the report can cause volatility and price action that we can profit from if we know how to.

Some of the major economic reports that move the currency market most are Gross Domestic Product (GDP), Retail Sales, Producer Price Index (PPI), Consumer Price Index (CPI), Industrial Production, Capacity Utilization, Unemployment and Non-Farm Payroll, Personal Income and Spending, and Interest Rate statements from the various Central Banks.

While economic indicators and reports affect currency prices, it is important to remember that reports like the ones listed above are not the only events to consider when trading currencies. Other things like technical factors and geopolitical events can profoundly affect a currency's value as well.

A great article that gives an inside view of the meeting that takes place when the officials actually get together to release the reports is included in a book called "Secrets of Economic Indicators," by Bernard Baumohl. Click here to read his article called "The Lock-Up."

Before trading it is always a good idea to check an economic calendar that lists the schedule of reports that are due to be released for that day. Many profitable trading opportunities will present themselves either in anticipation of a report's release, or shortly after the release of the report especially when the result deviates considerably from the expectation.

Once the results are released, take time to evaluate the results and ensure that you understand them before acting too quickly. There are often revisions to the prior month's numbers that can amplify or counteract the impact of the the current result. The revisions are often just as important as the current number.

When reports are used properly, they can be an invaluable resource for properly trading currencies. Click on this link for a complete overview of both economic reports and economic indicators.