There are various factors that affect exchange rate changes. We analyze from domestic and foreign perspectives, and conduct economic analysis on the changes of various indicators. the
1. Gross Domestic Product (GDP): An important indicator to measure a country’s economic development, it refers to the total value of all final products and services produced in a country in a certain period of time. It reflects the quality of a country’s overall economic situation and is closely related to economic growth. It is called “the most comprehensive economic dynamic index”. The components are composed of four parts: consumption, private investment, government expenditure, and net exports. The economy is booming, the national income continues to grow steadily, and the data also grows steadily; otherwise, it goes in the opposite direction. Generally, a country is considered to be in recession if its GDP has fallen for two consecutive quarters. The U.S. Department of Commerce conducts statistics on data quarterly, and the results are divided into initial value, revised value and final value. The release time of the final value is generally at 21:30 on a certain day at the end of each quarter, and the final value of the previous quarter is announced. the
2. Industrial production: This indicator is only for the industrial production sector, the total value of all industrial products produced by this sector within a certain period of time. Its share in GDP is quite large because the industrial sector employs a large number of workers, and its change is positively correlated with the exchange rate. Changes in this value have a significant impact on the national economy, the most important of which is the manufacturing sector . This data is calculated by the Federal Reserve, and the release time is around 21:15 or 22:15 in the evening on the 15th of each month. the
3. Unemployment rate: This data is closely related to the economic cycle and is a barometer of economic development. If the economic development is hindered, this value will rise; otherwise, the economic development trend will be good. Most countries consider an unemployment rate of around 4% to be normal for their economy, but if it exceeds 9%, the economy is already in decline. This data is compiled by the US Department of Labor and published at 21:30 on the first Friday of each month.
4. Trade deficit: This data is an important indicator of international trade. International trade constitutes an important part of economic activities. In a country’s economy, the amount of imports exceeds the amount of exports is called a trade deficit, and vice versa, it is called a surplus. The U.S. economy and trade have always been in a state of deficit, so the focus of trade has always been on the expansion or reduction of the deficit. The expansion of the deficit is not good for the dollar, and vice versa. This data is compiled by the U.S. Department of Commerce, and the figures for the previous month are released at 21:30 on a certain day in the middle and late months of each month. the
5. Current account balance: The current account is the main item on a country’s income and expenditure statement, which records the balance between a country and foreign countries, including the import and export of goods/services, investment income, income from other goods and labor services, and one-sided transfers. Outflow and inflow of funds. If it is a positive number, it is a surplus, which is beneficial to the domestic currency; otherwise, it is not conducive to the domestic currency. This data is compiled by the US Department of Commerce and released at 21:30 on a certain day in the middle of each month.
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6. Capital account revenue and expenditure: It mainly describes the long-term and short-term capital flows of a country, including long-term capital, non-liquid short-term private capital, special drawing rights, errors and omissions, and liquid short-term private capital and other items. Today, as finance is increasingly internationalized and liberalized, the impact of the capital account is no less than that of the current account account. The more open the financial market is, the greater the impact will be. The observation method of its impact on the exchange rate is basically the same as that of the current account. the
7. Interest rate: The interest rate is the return on lending funds or the price of using funds. The level of a country’s interest rate has a direct impact on the currency exchange rate. Due to the higher rate of return of the currency with high interest rate, the demand rises and the exchange rate appreciates; otherwise, it depreciates. The federal funds rate in the United States is determined by the Federal Reserve meeting. the
8. Producer Price Index (PPI): It mainly measures the price changes of various commodities in different production stages. Rising data shows that production is booming and inflation may rise. The Fed tends to raise interest rates, which is beneficial to the dollar; otherwise, it is not conducive to the dollar. This data is compiled by the US Bureau of Labor Affairs and released at 21:30 on the second Friday of each month. the
9. Consumer Price Index (CPI): The index of price changes calculated from the prices of products and services related to residents’ lives is the most important data when discussing inflation. If the data rises, inflation may rise, and the Fed tends to raise interest rates, which is good for the dollar; otherwise, it is bad for the dollar. However, inflation should be kept within a certain range. Too high (hyperinflation) or too low (deflation) is not conducive to the exchange rate. The data is compiled by the US Bureau of Labor Affairs and released at 23:00 on the third week of each month. the
10. Wholesale Price Index (WPI): It is a price index compiled based on the weighted average price of wholesale prices of bulk materials. The products included include raw materials, intermediate products, final products and import and export products, but various labor services are not included. When discussing inflation, one of the three most commonly mentioned price indices, the observation method is basically the same as CPI and PPI. The previous month’s data is published in the middle of each month. the
11. Leading indicators: by stock prices, consumer goods orders, weekly unemployment claims, building approvals, consumer expectations, changes in manufacturers’ delivery orders, money supply, sales performance, changes in sensitive raw material prices, plant and equipment orders, average The composition of items such as the working week is an indicator for observing the economic trend in the next 6-12 months. If the data is good, the exchange rate will rise; otherwise, it will fall. the
12. Personal Income: Represents the sum of personal income from various sources of income. Including wages and salaries, social benefits, expenditure savings, dividend income, etc. An increase in the data means that the economy is improving, and consumption may increase, which is beneficial to the domestic currency; otherwise, it is unfavorable. Compiled by the U.S. Bureau of Economic Research and published at 21:30 on a certain day at the beginning of each month. the
13. Commercial inventory (INVENTORIES): Including factory inventory, wholesale industry inventory, and retail industry inventory. It is mainly used to evaluate the production cycle status. If the inventory is lower than the appropriate level, production will increase, the economy will improve, and it will be beneficial to the currency; otherwise, it will be unfavorable. The data is compiled by the US Department of Commerce and released at 21:30 or 23:00 on a certain day in the middle of each month. the
14. Purchasing Managers Index: It is an important indicator to measure the manufacturing industry. Examines manufacturing in terms of production, new orders, commodity prices, inventories, employees, order deliveries, new export orders, and imports. The data takes 50 as the cut-off point of strength and weakness, above which means that the manufacturing industry is improving and is good for the currency; otherwise, it means recession and is not good for the currency. The data is compiled by the Institute for Supply Management (ISM) and published at 23:00 on the first day of each month. the
15. Durable goods orders: The so-called durable goods refer to properties that are not easy to wear out, such as heavy industrial products such as automobiles and aircraft, and manufacturing capital goods. Others such as electrical appliances, etc. are also. Durable goods orders represent the quality of manufacturers’ production in the next month. The data is positively correlated with currency exchange rates, but it is necessary to pay attention to the proportion of defense orders. Durable goods orders are compiled by the U.S. Department of Commerce and are generally released at 21:30 or 23:00 from the 22nd to the 25th of each month. the
16. Capacity Utilization: It is the ratio of total industrial output to production equipment. The scope covered includes manufacturing, mining, utilities, durable goods, nondurable goods, base metals industries, automobiles and vans, and gasoline. Represents the capacity utilization of the above industries. When the equipment utilization rate exceeds 95%, it means that the equipment utilization rate is close to the limit, and the pressure of inflation will rise rapidly as the production capacity cannot cope. When the market expects that interest rates may rise, it is bullish for the US dollar. Conversely, if the capacity utilization rate is below 90% and continues to decline, it means that there are too many idle equipment and the economy is in recession. When the market expects that interest rates may decrease, it is bad for the dollar. The previous month’s data is published in the middle of each month. the
17. Housing start rate: Generally, new housing construction is divided into two types, individual housing and group housing. The increase in housing starts and building permits is theoretically bullish for the dollar, but it still needs to be considered in conjunction with other economic data. Published between the 16th and 19th of each month.
