Forex News Fundamentals / Highly Affecting Economic Market Data – Part 1
For investors, analysts and traders, paying attention to the dynamics of economics and politics is an important activity that can increase the chances of portfolio success.
Here we describe a series of 6 fundamental forex news / economic data that has tremendous influence on the market, creating significant price fluctuations and certainly opens opportunities for more active trading. The first part is the employment situation data.
Data of labor situation (employment situation)
This data is very important to note investors and traders and analysts where the origin of a rate hike a country or in this case the US, derived from the labor situation data.
The ups and downs of US labor conditions will certainly affect all aspects of economic life from the aspect of economic growth to the inflation rate, so the US central bank, the Federal Reserve or better known as the Fed, will make its monetary decisions whether the interest rate falls, up.
This data is released simultaneously and released by the US Department of Labor or Labor Department in the first week of every month on Friday or the last day of trading in the first week.
Data of the US labor situation consists of 4 data, namely:
- Nonfarm Payroll or NFP
- Unemployment Rate
- Average Hourly Earnings, and
- Average Workweek Sheet
Nonfarm Payroll or NFP
Nonfarm payroll or NFP can be mentioned as data on the number of monthly wage earners outside the agricultural sector in the US within a period of one month.
This data gives the number of wage earners outside the agricultural sector because the agricultural sector in the US has a fixed number of workers that can not be used to measure the development of an economic growth rate.
This data affects the sector of economic growth or Gross Domestic Product (GDP) or Gross Domestic Product (GDP) in the US, as this data drives consumption or consumer spending and manufacturing data. This data is highly awaited by investors in both money market investors, commodities and equity markets, due to the enormous effect to drive the trading market.
Let’s look at the assumptions or logic we can do when the data is released.
- If the data is improved or the number of wage earners is greater than the previous period, then the worker will increase his income and the purchasing power will increase. Here personal income and personal spending data are increasing.
- When consumption increases, the sale of a grocery store or retail store or retail store will also increase, reducing inventory in stores and distributors so that goods orders to factories or durable goods orders data increases.
- When orders increase, factory activity increases and ISM / PMI manufacturing data increases and factories need new workers and the number of working hours will also increase. From factories when factory activity increases, the demand for raw materials and fuel for factory movers also increases so that prices will increase as raw materials become thinning to make the price will be unique.
This uniqueness is read by experts as a form of price increases. Finished goods that can not yet be fulfilled by the industry make the existing goods in retail stores will experience a scarcity so that the discount price is unlikely to happen. This makes the price will rise and become one of the triggers of inflation or CPI (consumer price index) data increases.
Higher CPI support is also due to laborers or workers receiving rising wages making cash turnover in the general public increased so that cash or cash deposits in the central bank are running low.
This means that money supply (M0 to M4) has increased and this endangers the strength of the central bank in tackling the threat of economic recession rising so that the central bank must conduct market operations.
This market operation varies, but what this central bank generally does is raise interest rates. This money market operation is done by the central bank is usually done when meeting interest rates such as FOMC (Federal Open Market Committee) meeting, but sometimes also without a sudden signal or suddenly the central bank will do so.
The purpose of raising interest rates or so-called tightening monetary policy is done to attract funds outside the central bank.
In the property sector will also be affected if the NFP data is increased. If workers increase their income then workers can buy new house (new home sales) and existing house sales (existing home sales) increases. On the other hand the banking sector will also wriggle as the credit side of home ownership also increases.
But be careful with the property sector because this sector provides the largest portion of the cause of the economic crisis of 2008-2009 then when the case of subprime mortgages that failed to pay to make the world’s economy collapsed.
NFP data is so great influence on all economic lines so that this data when the release, then the market moves very large and makes investors pay more attention to this data than other data.