Thread: Indicators for Fundamental Analysis

Fundamental Analysis is the study of macro-economic causes, which affect the forces of supply and demand of currencies. The economic data of major nations give reasons to buy or sell currencies. For this guide we look at the main data from the United States and how these data affect the speculation of investors.

The Inflation:
Inflation is described as the general increase in the price level of goods and services, which is measured in terms of annual percentage. If inflation rises, each unit of currency is proportional to buy fewer goods and services. The value of currencies is not constant when there is inflation. The value of currencies is observed in terms of real purchasing power of goods and services.

For investors it is important to monitor inflation, since when there are high rates of inflation that is correlated with the depreciation of the currency of this is that we must pay more units of money to acquire the same property. When there is inflation, increases in interest rates is likely that this may bring to the appreciation of a currency. Monitor inflation may produce signals to buy or sell currencies as well as measures to stop inflation.

The Central Banks:

One factor that basically moves the currency markets are the rate of bank interest. The interest rates give investors reasons to move capital from one country to another, seeking to limit risk and yields better performance. For years investors have sought the best possible option on securities markets, as speculators we need to know is that these differences in interest rates between countries, can produce signals to buy or sell a currency backed by a fundamental sense.

It is important to become familiar with the major central banks, since they determine the monetary policy interest rates, and predicting the future for a coin. In our website we will comment on the structure of the major central banks and how, with their monetary policy, we can speculate on the future of differential rates of interest.

Yeah i totally agree with your article. The leading indicators are as follows:
The following indices are related to inflation.
1. Consumer Price Index - Reflects the trend of the average price of consumer goods. This figure is positively related to inflation.
2. Producer Price Index - Reflects the trend of producer costs. This figure is positively related to inflation.
3. Retail Sales - Reflects the purchasing power of an economy.
4. Personal Income - Shows the growth in average income.
5. Personal Consumption Expenditure (PCE) - Shows the growth in average expenditure.
6. Prime Rate - The interest rate (lower than market interest rate) charged to highly reputable customers.
7. Discount Rate - Interest charged by central banks to commercial banks when borrowing money. Higher rates attract short-term inflow of investments.
8. Federal Fund Rate - The inter-bank rate for borrowing or lending reserve to meet margin requirement.

Originally Posted by finvik

Yeah i totally agree with your article. The leading indicators are as follows:
The following indices are related to inflation.
1. Consumer Price Index - Reflects the trend of the average price of consumer goods. This figure is positively related to inflation.
2. Producer Price Index - Reflects the trend of producer costs. This figure is positively related to inflation.
3. Retail Sales - Reflects the purchasing power of an economy.
4. Personal Income - Shows the growth in average income.
5. Personal Consumption Expenditure (PCE) - Shows the growth in average expenditure.
6. Prime Rate - The interest rate (lower than market interest rate) charged to highly reputable customers.
7. Discount Rate - Interest charged by central banks to commercial banks when borrowing money. Higher rates attract short-term inflow of investments.
8. Federal Fund Rate - The inter-bank rate for borrowing or lending reserve to meet margin requirement.

Your post is really great,keep it up.Thank you

Fundamental analysis give emphasis to economic, social, economic factors which drive supply and demand and it is based on things like economic growth rates, interest rates, inflation and unemployment. These all factors are analyzed to predict currency’s performance and future movement. But the problem with fundamental analysis is that the trader has to keep and analyze huge amount of data to get close to the result.