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Fundamentals are important economic indicators that influence the direction of the market. Forex fundamentals are thus important economic numbers that represent the state of the economy of a certain country/region and therefore the underlying currency. The release of important forex fundamentals can result in significant price changes, although the market in general already prices in the number. The biggest effects therefore come from the release of fundamentals that differ significantly from the predicted value.
There are thousands of fundamentals but most of them have very limited influence. A trader is therefore only required to know the most important ones, which can be found in the overview below. I will explain these important fundamentals and provide you with an overview of the upcoming releases.
 Central Bank Interest Rates define the direction of the forex market. |
Interest Rate
Every currency zone has an interest rate that is set by the central bank. This rate is the most influential number for the forex market. Higher rates makes it more attractive to possess a certain currency. The interest rate is a reflection of all other economic indicators. View a list of the interest rate of every major central bank.
The Gross Domestic Product (GDP)
The GDP is an indicator that values the total market value of all goods and services produced in a country during a year. This makes it the broadest measure of the state of an economy.
Retail Sales
The Retail Sales indicator measures the total amount spent in retail stores throughout a country. It is an important fundamental because it signals consumer spending which accounts for a majority of overall economic activity.
Industrial Production
The Industrial Production indicator measures the change in production of a nation’s factories, mines and utilities. The report also covers the capacity utilizations. It is important as production reacts quickly to the economic state of a nation.
Consumer Price Index (CPI)
The CPI is derived from a basket of products over 200 categories. It signals inflation risks and will therefore influence central banks policy concern