Nothing in this world happens without a cause, it’s the same for Forex, Commodity, and Indices.

The price fluctuations of forex, commodities, and indices are all caused by the assets behind them. For example, the forex is derived from the performance of the national economy, and everything good or bad about the national economy is directly reflected in the price of foreign exchange. Commodities fluctuate based on supply and demand, so any data that affects supply and demand also affects the final price of commodities. Various indices are composed of companies, so economic data also affect indices.

Therefore, we will share with you some of the most important economic data that affects the trend of forex, commodities, and indices.

• Gross Domestic Product (GDP)
• Consumer Price Index (CPI)
• Federal Fund Rates
• Unemployment rate

Gross Domestic Product (GDP)

A country's GDP is a representation of the dollar value of goods and services produced in that country, usually over a period of one year. Here’s the formula for GDP

If the GDP is higher compared to last year or last quarter, it’s a good sign for the country because it means that people are spending more money all the time, products are selling well, there is no overstocking, the economic mechanism is working well, and the country is growing. Therefore, people (including foreigners) will be more willing to hold the national currency. More people holding the currency will cause the currency to appreciate. If the currency continues to appreciate, people will feel that it’s too expensive to buy the country's stocks, which may lead to a decline in the stock market index.

Consumer Price Index (CPI)

CPI is a measure of price changes of a predetermined group of goods and services purchased by households in a country. The CPI is used to track price changes and reflect inflation rates.

Usually, CPI YoY is used as a reference value so that they can see the difference between last year’s price and this year’s price.

If the CPI rate increases by about 2%, it’s a good sign for the economy as money is flowing in the economic system. However, too high or negative inflation hurts the economy. High inflation causes people to decrease in purchasing power, which results in people spending more on needs than wants. When people spend less, the cash stops flowing and the economy declines. Negative inflation means that the future price is lower than the current price. It also means that negative inflation will cause the price of goods to continue dropping in the future, therefore people will always extend the time to buy things because they can use a cheaper price to get the product. It is the same as above, if people don’t spend, the money flow will stop and the economy will weaken.

Federal Fund Rates

The Fed will announce the interest rate during the FOMC. This interest rate is a regulator to control the speed of money flow. When the interest rate increases, the cost of debt becomes higher, so people are not willing to borrow money. Moreover, due to the increase in interest rates, people will save their money with high-interest rates instead of spending it. In this situation, the market will contract until the interest rate starts to decrease. In summary, the interest rate can decide the speed of cash flow and influence the market to expand or contract. This interest rate data can tell us what direction the Fed is going to take. If they want to calm the market, then we need to short the index, because if the market contracts, the price of the asset will fall.

Unemployment rate

Unemployment is a situation where a person actively searches for employment but is unable to find work.

Using the unemployment rate data, we can clearly see the situation of the local labor force. If the unemployment rate of a country is higher than expected, it means that most companies are not willing to hire employees, and some companies even start to lay off employees, which leads to an increase in the unemployment rate. The company no longer needs employees, which also shows that the current business doesn’t need that many employees to function. Simply put, the company's performance has decreased. In order to cut expenses and balance revenues, the only way left is to cut employees. If the unemployment rate is higher than expected, it also reflects that the country's economy is not doing well. This can affect the currency, the index, the company, etc

Above are the 4 economic data a trader must take note of when in the market.

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