All data is important and some data gains greater importance at certain times depending on key factors affecting the trading industry globally. At Finior Capital we recognise the need for the data and thus we employ a team of highly skilled and experienced market analysts with the latest news.

There are however some consistently important news events which are repeated on a

• Weekly
• Monthly
• Quarterly
• Yearly basis

There are lists of data sets which come out on a daily basis. Finior Capital provides a free to access economic calendar which lists forthcoming releases and provides data on prior releases.

Let’s explore the different sets of data markets offer

Non-Farm Payrolls

For most, the king of datasets is the Non-Farm Payrolls number or more commonly known as the NFP.

The NFP number is released monthly on the first Friday of every month. The NFP calculates the num- bers of new employees during the previous month in the United States. It has an overbearing impact on the market and can cause large amounts of volatility in all liquid asset classes and the forex market.

Due to the NFP being released so early after the end of the previous month it can give traders and investors an early warning of economic changes and as such it is a valuable tool in helping one decide if new risk should be taken or if current exposure management should be changed.

The NFP is important because it acts as a barometer of the United States economy and is a leading indicator on possible changes to consumer spending.

For example

If the market consensus expects 241K new vacancies to have been filled in December and November's number is 235K the market is expecting an improvement in the outlook for Jobs.

If the actual release was for instance 230K then the market will be disappointed that the actual release missed the consensus target and the prior month’s number. This number will also disappoint the Federal Open Market Committee (FOMC) which is the body that manages United States interest rate policy.

A number that shows contraction could lead to a decision to reduce interest rates or put into discussion the possibility of an interest rate cut. The very idea that the FOMC could be contemplating a cut in interest rates would add a great amount of volatility into global markets. With respect to the Forex Market the US Dollar will decline as investors will exchange the Green Back for currencies that have higher interest rate yields.

Therefore the importance of NFP outlooks is evident. Now let's take a look at another very important set of data which is GDP.

Gross domestic product (GDP)

Adding to the NFP numbers we discussed above, is the GDP. A data set that accounts for all the goods and services produced by a country over a predetermined time period. This outcome of the calculation (number) is called the Gross Domestic Product. The GDP is a barometer of a country's health. This is because rising numbers would indicate that a country is producing more and more goods and services.

A productive and healthy economy is an attractive economy both to investors who would like to inject fresh capital into the economy but also to the Forex Market where traders will flock to purchase a sought after currency.

There is also a flip side of course where declining growth numbers indicate that the country is going through a slowdown which could be due to some cyclical or structural problems of the country’s economy.

Moving on, the next data set is a word that’s on everyone's lips.

InflatIon

Inflation in an economic context occurs when underlying data indicate that the trend in prices for goods and services experiences a sustained increase over a predefined time period.

Governments, Central Banks, business, traders and investors monitor data releases for the Consumer Price Index (CPI) and the Producer Price Index (PPI) which are released regularly on a monthly and quarterly basis.

Inflation is viewed negatively by the general public as it limits their purchase power as it erodes the value of a given currency. However some inflation is needed to ensure that an economy grows at a consistent and sustainable level.

During periods when the inflation rate is rising at a slower speed or when prices are actually falling, it can have a detrimental effect on growth and therefore impact on the Gross Domestic Product.

The reason being that, during periods of falling or negative inflation (also known as deflation) both the general public and businesses could put off the purchase of goods and services. The resulting drop off in demand could lead to reduction in the rate of economic growth.

Central Banks of developed nations such as the United States Federal Reserve, the Bank of England and the European Central Bank attempt inflation targets of between 2-3%. If the rate of inflation data begins to indicate that prices increase above and beyond this threshold, a Central Bank will raise interest rates. The action of raising interest rates has the effect of reducing the money supply in the economy. This under normal circumstances should lead to some of the heat being taken out of an economy that is growing too fast. In turn the drop off in demand causes the inflation rate to fall back into target levels.

The rate of interest has a direct link to the value of a currency. An increase in interest rates will make a currency more attractive to invest in. This is due to the higher interest yield an investor will receive for a deposit if compared to a currency that has a lower rate of interest.

Traders and investors therefore attempt to anticipate increases in the rate of interest before it happens. By doing this a trader will benefit from the appreciation in the value of the affected currency.

The last factor we will examine in the current article is Unemployment rate.

Unemployment Rate.

Economic data that is derived from readings from the labour market has a huge impact on the financial markets. The most important data sets originate from the United States with the Non-Farm Payrolls (NFP) data dominating all other releases. These other releases being the Unemployment Claims and Average Earnings data.

The reason labour data are so important is because they can be directly linked to the health of an economy.

As such a buoyant labour market is an indication that an economy is growing with the labour force being economically productive and contributing to a country's economic activity. Whereas increasing or already high levels of unemployment is a strong indicator that the economy is suffering from a drop off in demand and the associated risks of falling growth levels.

In times of rising or full employment the Central Bank will seek to curb a tendency for inflation to get out of control by increasing interest rates and reducing the money supply. Whereas at times when the labour market is shrinking and the economy is experiencing a contraction the Central Bank will reduce the interest rates as a means to increase the money supply and stimulate the economy through an expansion of credit.

In this article we have looked into some of the most important data sets a trader should follow when trading forex. Follow our next blog to find out more about which data are important when trading forex, one of the fastest growing industries in the world.