Fundamental Analysis and Financial Annual Report
Fifty Third session of Forex Training
Welcome back to Forex professional training in financial markets.
In this session Fundamental Analysis and Financial Annual Report will be studied.
Interest rate
Interest rate news is the most significant announcement in financial markets.
Interest rate changes rarely, however, information provided on press conferences determines the direction and trend of that currency.
Changing Interest rate is discussed in Press Conference whether Interest rate will remain untouched in the future or it will be reformed.
Increment news of interest rate have advantageous effect on financial markets, while any decline of interest rate results in decrements in financial market.
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Economic Outlook is another subject, discussed in that Press conference, which determines recent financial and economic condition as well as economic policies and objectives.
For instance, if a spokesman declares that “the economy has a sound condition, also the prospects of economic objectives are definite”.
The consequences of this announcement have a considerable advantageous effect on the financial market.
Inflation and Deflation data is represented in this conference too. Inflation renders economic growth, while deflation causes recession.
Quantitative Easing, known as QE in the US, is a monetary policy that central bank utilises to ameliorate the ailing economy.
It is called an Asset Purchase Facility, APF, in Great Britain. Any alteration in this policy would have a considerable effect on the financial market.
There are three phases in which news should be analysed: Previous, Prediction and Announcement.
For instance, if a previous APF in England had been £200 billion, and prediction before the press conference has determined £200 billion, then in the press conference it was declared that APF for the next year will be £200 billion.
Thus, APF news did not have any influence on the financial market.
If it was announced in press conference that APF is set on £180 billion,then it shows the economy condition has improved considerably.
On the other hand, if APF is set to£220 billion, then it can be inferred that the economy condition has weakened.
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- Central Bank of US is known as FOMC
- Central Bank of Great Britain is known asBOG
- Central Bank of European Union is known asECB
- Central Bank of Japan is known asBOJ
- Central Bank of Australia is known asRBA
- Central Bank of New Zealand is known asRBNZ
GDP (Gross Domestic Product)
Another important news announced in Press Conference is GDP, Gross Domestic Product, which shows the amount of export.
The higher value of GDP indicates better economy conditions. 3 different GDP values of the UK are declared: Prelim, Final, Revised.
Press conference of European Union specifies 2 types: Prelim and Final; while in the US there are 3 forms: Final, Prelim and Advance.
In the European Union and Great Britain Prelim and in the US, Advance are the most important values.
Germany provides 28% of GDP in the European Union, while France, Italy, Spain and Portugal supply less amount of GDP.
Higher amount of GDP results in a more powerful currency.
Unemployment rate and employment change
Unemployment rate and employment change rate are declared in the Press Conference.
While most people concentrate on the Unemployment rate, which is the summation of unemployment rate divided by the number of periods, the employment Change has more profound effect on the market trend.
Unemployment rate, like Moving Average, has less effect on the market due to its lag, however, employment Change is the latest value of Unemployment in the country.
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PMI (Purchasing Management Index)
PMI, Management Buying Index, is another value to be announced in Press Conference that increases when the interest and inflation goes up, thus, it shows economic condition enhancement.
It indicates the amount of orders, productions and Buy shares by managers.
If this value is over 50, the economy is in a good condition, while rate lower than 50 shows economy has weakened. PMI has two types:
- In the US, Manufacturing and Non-Manufacturing
- In other countries, Services and Manufacturing
Obviously Manufacturing shows the PMI value in manufacturing and production fields, while PMI of Manufacturing has more effect on the market trend rather than Non- Manufacturing or Services value.
Retail sell
Retail Sell is another value specified in Press conference that shows costumer buying power provided by those companies that represent goods to the end user.
PPI (Producer Price Index)
PPI or Producer Price Index, announced in Press Conference, shows the production rate.
Higher value of PPI specifies better economy condition. PPI is the expense of manufacturing and production of goods.
CPI (Consumer Price Index)
Consumer Price Index, CPI, will also be declared in Press Conference. This value shows changes in the major expenses of a family.
Higher value indicates higher inflation, consequently, economy growth and higher income.
Under a rare occasion, in which a disaster such as war or earthquake happens, major requirements like food and energy are omitted from this value, which is called Core CPI, due to an increment in the market price of these materials.
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Traders can access an extensive information on Forexfactory.com.
Interest rate and GDP determine the direction and trend of the currency, while other rates cause daily, weekly or monthly fluctuations.
That concludes this session, until next time and another session take care.