Fundamental announcements are important pieces of forex information because they affect forex prices significantly (often preceded by a tight sideways consolidation in forex charts as forex traders wait for the fundamental announcement).
To monitor forex fundamental announcements, I use the free forex economic calendar at fx360.
A fundamental announcement is a report released by a country to announce its recent economic performance. This is important forex information for trading. There are about 14 different reports that the major Forex players release to describe the economic situation in their countries.
Fundamental announcements reveal the relative strengths of a country’s performance in a variety of areas and can shift the value of that country’s currency.
Fundamental announcements, therefore, are the main reasons for large price swings and breakouts in the currency market.
Each country has a wide variety of forex information it releases in its fundamental announcements.
Some examples of the most widely released forex information are:
- GDP (Gross Domestic Product): The total amount (expressed in dollars) of the goods and services produced in the country. GDP includes goods and services produced by private industry as well as goods and services produced by public industry. GDP is usually expressed in real terms (that is, prices are indexed relative to some year in the past such that GDP does not also include inflation).
- CPI (Consumer Price Index): The CPI reflects the relative price of certain consumer items like food, clothing, housing, transportation, and energy. It is indexed to provide a measure of today’s prices compared to prices at some other time (e.g. 1983 or 2000).
- PPI (Producer Price Index): The PPI reflects the relative price of certain items used by producers in the production process. The PPI includes such items as raw materials and energy. Like the CPI, the PPI is indexed to provide a measure of today’s prices compared to prices at some other time (e.g. 1983 or 2000).
- Unemployment rate: The unemployment rate is calculated by dividing the total number of persons seeking employment by the total number of persons who are employed. The unemployment rate reflects the percentage of people who want jobs (and are actively seeking jobs) but are jobless.
- Personal income: The amount of money that all of the persons of the country made in income. Per capita personal income, another measure, is the total amount of income received divided by the number of persons in the country. Like GDP, personal income is usually expressed in real terms (that is, dollars are indexed relative to some year in the past such that personal income does not also include inflation).
- Consumer spending: The amount of money that all of the persons of the country spent (the amount of income that was spent on consumer goods such as food, clothing, housing, luxury items, etc.). Like GDP and personal income, consumer spending is usually expressed in real terms (that is, dollars are indexed relative to some year in the past such that consumer spending does not also include inflation).
Other forex information released in a fundamental announcement includes industrial production, capacity utilization, retail sales, money supply, current account balance (the balance in a country’s international trade account), and government deficits.
Not all fundamental announcements, however, move forex prices. If the fundamental announcement does not reveal any new forex information about the country’s economic performance, then the value of that country’s currency will likely not change. In this case prices would not break out of the consolidation, but rather would slowly return to the previous trend.
When a fundamental announcement from a previous trading session moved the market to a new price and the new fundamental announcement is only repeating that price move, then the market will likely not respond to the fundamental announcement with a break out. In either case, prices would likely continue to move in the direction of the trend that existed prior to the consolidation.