Fundamental analysts use real market data and live events as a means of predicting the future market movements. The idea is that factors like Gross Domestic Product and (un)employment affect a country’s economy and currency, and similarly the performance figures and earnings of a company affect related stocks and indices.
Below are six of the main fundamental reports and market influencers, covering a range of economic sectors. Following these figures and reports will give any binary options traders a great advantage when it comes to understanding the markets and predicting asset movements.
Gross Domestic Product (GDP)
This figure is the total sum of all goods and services which are produced by a country. The GDP is therefore a very useful indicator of economic output, showing the pace at which that country’s economy is shrinking or growing. Consumer spending, business and residential investments, as well as inflation indexes, all contribute to the GDP, and in turn this dictates how various investments will perform.
Nonfarm Payroll
The NFP report, released on the first Friday of each month, provides the most comprehensive employment statistics in the U.S. It reveals how many people are looking for jobs, how many are employed, what hours they work and what they are paid. This report has a huge market influence since its figures offer an accurate indicator of the current state of the U.S. economy and its future direction, which impacts on the global economy.
Consumer Price Index (CPI)
The CPI is the measure of the average price level of a fixed range of services and goods which are purchased by consumers. The rate of inflation is clearly visible in the monthly changes in the CPI, making this index the most followed indicator of inflation in the U.S. By following the trends in inflation, whether climbing or dropping, investors can anticipate how various types of investments will perform.
Home Sales and Starts
Housing figures indicate consumer demand for housing and also the outlook for the construction industry, impacting on the stocks of home builders, mortgage lenders and home furnishings companies. Since people must feel confident in their own financial position before buying a house, these figures also give a revealing insight into the general economic momentum. Analysts review the data on new home sales, existing home sales and housing starts.
International Trade Reports
International trade is the measure of the value of all imports and exports of goods and services. The U.S. report reveals the monthly changes in import and export levels, as well as the trade balance, the difference between the two, and is a valuable indicator of economic trends. Data has a direct and strong impact on the foreign exchange value of the USD. The report also offers a breakdown of trade with other major countries, making it useful for investors interested in diversifying globally.
Institute for Supply Management Reports
The ISM issues monthly publications with data on national manufacturing conditions. This is useful for investors given the high impact that the manufacturing sector has on the economy. Readings above 50% indicate an expanding factory sector. The Federal Reserve uses these reports to help it decide on the direction of interest rates when inflation signals appear.