Economic indicators are bits and pieces of economics and financials reports which are published by different agencies of private sector as well as the government. These statistics are usually made public on a regular basis; this can either be monthly, quarterly, and yearly while some, though rare, may be issued to cover a longer period. The data is supposed to help the market analyst and observers monitor the performance of a country economy.
Almost everyone in the financial market religiously follows their release in order to make a sound investment decision or offer accurate information in relation to the future performance of the financial markets. Given that that are so many people who react to the information which is presented by these indicators, they have the potential of shaking the market through generating revenue as well as moving prices. Given the nature of these indicators, in some situation one might need an advanced degree to interpret and analyze data as well as use it to make decisions. This does not mean that a layman cannot make sense of what the data says; with simple guidelines it is possible to understand the information and make sound decisions.
Knowing what each economic indicator means to economic performance and Forex market in general is the first step towards making sense of the data. It is also important to know when each of it is due for release; an economic indicator calendar can help greatly towards this end. With various economic indicators being released regularly this tool will tell the investor which report is due when. Employment change is one of the economic indicators that a Forex needs to understand, it shakes every sector of the economy. Employment reflects the economic situation in a country, a rise in the number of employed people means that the things are doing well. It means that industry and economy is doing well, people are getting hired, they are getting some income to sustain them. This means that the economy will grow and future prospects of the country performing well are high. This will be through increased investment by locals as well as foreigners; the investors have faith that their money will yield high profits. To invest in this economy, those who are from outside the country will have to buy the national currency .Demand for the local currency will eventually lead to rise in value. On the other hand employment change which indicates a drop in the employment rate spells doom the economy as well as the local currency. A drop in the employment rate means that a given number of people will be without salaries or wages. They will have to rely on welfare meaning that the government will be forced to spend more to sustain them. It also means that the spending power of this group will be greatly diminished. This will have a multiplier effect, the economy will not perform well, there will be few people who will be interested in putting there money here. This reduces demand for the local currency ultimately reducing its market value.
Experts say that value of currency and employment change are edges of a sword for industrial economies as well as those countries which rely on tourism. An economy whose currency is expensive will not do well as other countries will not afford buying goods and services using this currency. As a Forex trader it is important to understand this information in order make sound investment decision.