Fast facts of the U.S. economy
-Currently US is the economy more big of the world with a GDP nominal of 13.25 trillion of USD, 3 times more large that its more close competitor.
-US has a very large deficit (this because they are the most important in the majority of countries trading partner).
-In accordance with the BIS, the USD is involved in 89% of currency transactions.
-The book Federal (or FED, banco central of US) has two objectives main:
1. price stability
2-growth constant
-He USD is perceived as an of them coins more strong and reliable in the world, as a result many countries (the most in development) set their coins to the USD.
Indicators economic important to US
Non-Farm Payrolls - NFP (US-unemployment)
The NFP is probably in the top 3 of those indicators that more move to the market.
The NFP shows the number of jobs created in the economy in a given month (jobs out of the sector government and Agriculture). Is one of them best indicators of the strength of the market works, and as already know, the market labor always is followed as an important diagnosis of the economy in general.
A strong number indicates a strong economy, therefore we would expect an appreciation of the USD.
A number weak indicates an economy weak, therefore you would expect a depreciation of the USD.
This report is published the first Friday of each month.
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Rate of interest
As we already mentioned, interest rates are a measure of the cost of money. Central banks use the rate of interest as a tool to meet its main objectives.
A increase in them rates of interest of US typically increases the demand of USD, investors sold its currency local for buy USD to take advantage of it improves in performance increasing its demand and by ende the value of the USD.
A cut in US interest rates typically decreases the demand for USD, investors sold USD to exchange them for other currencies that generate better yields, this increases the offer of USD, decreasing its value.
When there is no change in interest rates can be interpreted as both feeling bullish or bearish depending on the circumstances. No change after a period where it fell continuously, it is perceived as bass player and after a period of increases, as bullish sentiment.
This report was announced 8 times to the year.
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Trade balance
This indicator measures the exports and net imports of goods and services from US. This is the commercial flow of the balance of payments component, which measures the demand and supply of a country (as previously explained it).
It is important to note that US has a negative trade balance with almost all the countries of the world.
The USD tends to appreciate in a number,
The USD tends to depreciate at a bad number,
This report is published every two months (mid month).
Page of the ad: click here for access to the data
Consumer Price Index (CPI)
It is an index that measures changes in the price of a basket of commodities of products and services (inflation). The aim of this indicator is to measure price changes, leaving out the changes in the quality of goods and services.
If the CPI increases, the purchasing power of a low currency, having a negative impact with the USD
If the CPI decreases, the purchasing power of the currency climbs, having a positive impact with the USD.
This report is commonly published the second week of each month.
There is another related indicator, the Core CPI, which measures the same thing but excludes food and products related to energy, the more volatile components of the CPI. By ende, has more stability in the measurement of changes in those prices.
Page of the ad: click here for access to the data
Consumer Confidence Index
The JRC is a survey of 5,000 consumers, how they perceive the conditions of the economy, the business climate and what to expect in the future. Shows that so confident are the consumers in a month given.
A good number of ICC indicates an economy in good state, affecting of way positive to the USD.
A wrong number of ITC indicates an economy in wrong state, affecting of way negative to the USD.
This report was published near the end of each month.
Page of the ad: click here for access to the data
Retail Sales
The sales to the retail are an indicator of expenditure from consumption. Measuring the sales of stores to the retail (including goods durable and not durable), but excludes services (the greater disadvantage of this indicator).
A number indicates favorable economic conditions, therefore the USD tends to gain value.
A bad number indicates unfavorable economic conditions, therefore the USD tends to lose value.
The movements of currencies, like any other financial market, are directed by two main forces: supply and the demanda.cuando a currency increases in value, this demand being more larger than the offer. When a currency falls in value, the offer is being larger than its demand.
Do factors influence on the supply and demand for a currency?
The two most important factors that influence the price of a currency are:
1 flow of capital
2. trade flows
These two components are what we call as balance of payments. The main purposeof the balance of payments is to quantify the demand and supply of a currency of acountry by in a given period.
Balance of payments = flow of capital + flow commercial
A negative balance of payments indicates that the capital leaving the country is greater than the capital entering the country (demand is small).
A positive balance of payments means that capital coming into the economy is greater than the capital that is out (increase in demand domestic currency).
Theoretically, a balance of payments equal to zero indicates the "true" value of a currency.
I-the flow of capital
He flow of capital is the amount net of currency (purchases and sales) through investments of capital.
The flow of capital can be divided in: flow physical and flow of investment
Physical flow. This flow happens when entities foreign sold its currency local and buy currency foreign to make investment foreign direct (for make acquisitions, etc.) when the value of this type of investment increases, reflects a good state of the economy where is invested them capital.
Flow of investment. These are investments in global markets, fixed-income and variable (Forex, stocks, notes of Government, etc.)
II - trade flows
The commercial flow measuring exports and net imports of a country. These two components are what we call current account.
Countries that have a has current positive (export greater that imports) is more prone to devalue its currency. Thus foreign consumers perceive cheaper currency with which to buy goods or foreign services (can buy more goods and services). A good example of this case is Japan.
Countries that have a negative current account (imports outweigh exports) are morelikely to appreciate its currency because they need to sell the local currency more face to buy goods and foreign services at a lower cost. An example of this case is theof United States.
Within the analysis Fundamental, there are two theories that us help to know if thequote of a coin this high or low, and therefore win money if act accordingly. These two theories are:
I. the power of parity of purchase (PPP - Purchasing Power Parity)
This theory explains that changes in exchange rates are determined by the relative prices of a basket of similar goods between different countries. In other words, the reason of prices of the basket with goods similar must be equal or similar to the typeof change.
For example, if a computer in Australia costs AU$ 1,500 and the same computer in the United States costs US$ 1,200, according to the PPP, the AUD/USD exchange rate is 1.2500 (1,500/1,200 = 1.2500).
If the AUD/USD exchange rate was 1.3000 (or top 1.2500, according to this theory the value of the exchange rate must depreciate up to 1.2500. on the other hand, if the exchange rate were 1.0500, this would tend to appreciate up to 1.2500.)
These examples are purely illustrative, in the world real is applied to a basket of goods and not to just a well.
The biggest weakness of this theory is that it assumes no transaction costs related to the trade in these goods (taxes, rates, etc.) Another disadvantage is that not considered other factors that can influence the type of change (such as the interest rate).
II - theory of the rate of interest
This theory establishes that the differential in them rates of interest neutralize themchanges positive and negative of a currency against any other, of such way that notcan have arbitration (opportunities without risk).
For example, if Australia interest rate is 5.5% and the United States interest rate is 3.5%, then the AUD should appreciate so that in this way there are no opportunities for arbitration.
There are other theories that try to explain the value of a currency pair. But like all theories, they are based on assumptions and they cannot be taken as Dogmas of faith.
-Currently US is the economy more big of the world with a GDP nominal of 13.25 trillion of USD, 3 times more large that its more close competitor.
-US has a very large deficit (this because they are the most important in the majority of countries trading partner).
-In accordance with the BIS, the USD is involved in 89% of currency transactions.
-The book Federal (or FED, banco central of US) has two objectives main:
1. price stability
2-growth constant
-He USD is perceived as an of them coins more strong and reliable in the world, as a result many countries (the most in development) set their coins to the USD.
Indicators economic important to US
Non-Farm Payrolls - NFP (US-unemployment)
The NFP is probably in the top 3 of those indicators that more move to the market.
The NFP shows the number of jobs created in the economy in a given month (jobs out of the sector government and Agriculture). Is one of them best indicators of the strength of the market works, and as already know, the market labor always is followed as an important diagnosis of the economy in general.
A strong number indicates a strong economy, therefore we would expect an appreciation of the USD.
A number weak indicates an economy weak, therefore you would expect a depreciation of the USD.
This report is published the first Friday of each month.
Page of the ad: click here for access to the data
Rate of interest
As we already mentioned, interest rates are a measure of the cost of money. Central banks use the rate of interest as a tool to meet its main objectives.
A increase in them rates of interest of US typically increases the demand of USD, investors sold its currency local for buy USD to take advantage of it improves in performance increasing its demand and by ende the value of the USD.
A cut in US interest rates typically decreases the demand for USD, investors sold USD to exchange them for other currencies that generate better yields, this increases the offer of USD, decreasing its value.
When there is no change in interest rates can be interpreted as both feeling bullish or bearish depending on the circumstances. No change after a period where it fell continuously, it is perceived as bass player and after a period of increases, as bullish sentiment.
This report was announced 8 times to the year.
Page of the ad: click here for access to the data
Trade balance
This indicator measures the exports and net imports of goods and services from US. This is the commercial flow of the balance of payments component, which measures the demand and supply of a country (as previously explained it).
It is important to note that US has a negative trade balance with almost all the countries of the world.
The USD tends to appreciate in a number,
The USD tends to depreciate at a bad number,
This report is published every two months (mid month).
Page of the ad: click here for access to the data
Consumer Price Index (CPI)
It is an index that measures changes in the price of a basket of commodities of products and services (inflation). The aim of this indicator is to measure price changes, leaving out the changes in the quality of goods and services.
If the CPI increases, the purchasing power of a low currency, having a negative impact with the USD
If the CPI decreases, the purchasing power of the currency climbs, having a positive impact with the USD.
This report is commonly published the second week of each month.
There is another related indicator, the Core CPI, which measures the same thing but excludes food and products related to energy, the more volatile components of the CPI. By ende, has more stability in the measurement of changes in those prices.
Page of the ad: click here for access to the data
Consumer Confidence Index
The JRC is a survey of 5,000 consumers, how they perceive the conditions of the economy, the business climate and what to expect in the future. Shows that so confident are the consumers in a month given.
A good number of ICC indicates an economy in good state, affecting of way positive to the USD.
A wrong number of ITC indicates an economy in wrong state, affecting of way negative to the USD.
This report was published near the end of each month.
Page of the ad: click here for access to the data
Retail Sales
The sales to the retail are an indicator of expenditure from consumption. Measuring the sales of stores to the retail (including goods durable and not durable), but excludes services (the greater disadvantage of this indicator).
A number indicates favorable economic conditions, therefore the USD tends to gain value.
A bad number indicates unfavorable economic conditions, therefore the USD tends to lose value.
The movements of currencies, like any other financial market, are directed by two main forces: supply and the demanda.cuando a currency increases in value, this demand being more larger than the offer. When a currency falls in value, the offer is being larger than its demand.
Do factors influence on the supply and demand for a currency?
The two most important factors that influence the price of a currency are:
1 flow of capital
2. trade flows
These two components are what we call as balance of payments. The main purposeof the balance of payments is to quantify the demand and supply of a currency of acountry by in a given period.
Balance of payments = flow of capital + flow commercial
A negative balance of payments indicates that the capital leaving the country is greater than the capital entering the country (demand is small).
A positive balance of payments means that capital coming into the economy is greater than the capital that is out (increase in demand domestic currency).
Theoretically, a balance of payments equal to zero indicates the "true" value of a currency.
I-the flow of capital
He flow of capital is the amount net of currency (purchases and sales) through investments of capital.
The flow of capital can be divided in: flow physical and flow of investment
Physical flow. This flow happens when entities foreign sold its currency local and buy currency foreign to make investment foreign direct (for make acquisitions, etc.) when the value of this type of investment increases, reflects a good state of the economy where is invested them capital.
Flow of investment. These are investments in global markets, fixed-income and variable (Forex, stocks, notes of Government, etc.)
II - trade flows
The commercial flow measuring exports and net imports of a country. These two components are what we call current account.
Countries that have a has current positive (export greater that imports) is more prone to devalue its currency. Thus foreign consumers perceive cheaper currency with which to buy goods or foreign services (can buy more goods and services). A good example of this case is Japan.
Countries that have a negative current account (imports outweigh exports) are morelikely to appreciate its currency because they need to sell the local currency more face to buy goods and foreign services at a lower cost. An example of this case is theof United States.
Within the analysis Fundamental, there are two theories that us help to know if thequote of a coin this high or low, and therefore win money if act accordingly. These two theories are:
I. the power of parity of purchase (PPP - Purchasing Power Parity)
This theory explains that changes in exchange rates are determined by the relative prices of a basket of similar goods between different countries. In other words, the reason of prices of the basket with goods similar must be equal or similar to the typeof change.
For example, if a computer in Australia costs AU$ 1,500 and the same computer in the United States costs US$ 1,200, according to the PPP, the AUD/USD exchange rate is 1.2500 (1,500/1,200 = 1.2500).
If the AUD/USD exchange rate was 1.3000 (or top 1.2500, according to this theory the value of the exchange rate must depreciate up to 1.2500. on the other hand, if the exchange rate were 1.0500, this would tend to appreciate up to 1.2500.)
These examples are purely illustrative, in the world real is applied to a basket of goods and not to just a well.
The biggest weakness of this theory is that it assumes no transaction costs related to the trade in these goods (taxes, rates, etc.) Another disadvantage is that not considered other factors that can influence the type of change (such as the interest rate).
II - theory of the rate of interest
This theory establishes that the differential in them rates of interest neutralize themchanges positive and negative of a currency against any other, of such way that notcan have arbitration (opportunities without risk).
For example, if Australia interest rate is 5.5% and the United States interest rate is 3.5%, then the AUD should appreciate so that in this way there are no opportunities for arbitration.
There are other theories that try to explain the value of a currency pair. But like all theories, they are based on assumptions and they cannot be taken as Dogmas of faith.
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