How to Deal with News Indices

[PCMNewsdesk]

Dear Members and Users

Hereby,
We decided to inform you that here a matter would be started very soon that discuses about how to think of news indices and deal with them.
We hope this thread is informative and useful for all of you, as it is necessary to know while trading news and trading Forex.overally.

Best Wishes & Profit Trading
News Desk

[PCMNewsdesk]

We are going to discuss about the Economic News Indicators and how to deal with them. Our targeted market is the Forex/currency market, so we have to focus on the news indicators based on the impact it is having on our targeted market.
The news indicators or the economic events as they are called sometimes, are the reports which reveal the current data and condition of an economy’s different sections like industry, employment, consumers etc.

The following points should be noted of while rating the news indicators and events:


Each indicator from each economy has its own impact on the currency exchange rate.
When rating these indicators you have to consider that the stronger the impact of an event on the targeted market, the more important it becomes.
The economic news indicators and events’ importance and value change in different periods.


PS: In this thread the basis of valuation for economic news indicators and events is their overall impact during different periods.

Economic News Indicators and Events Rating

The news could be rated either alphabetically or numerically. In this thread I will list the news indicators alphabetically.
Tip: Each news from different classes (A, B, C) is divided into lower classes with positive sign (+) for high impact, no sign for medium and negative sign (-) for low impact.
The news having rating (A) effects the most on the currency exchange rate while news with A+ has more impact during its release. The most important news having rating (A) are the news reflecting the monetary policies.
The second level of news impacting the market is rating (B) which has less impact on the currency exchange rate. If this news is released completely beating expectations then it could create a move like rating (A) news on the currency exchange rate, otherwise there will be medium impact.
Tip: Rating (B) news has an impact on rating (A) news instead of having directly impact.
The last one is rating (C) news which doesn’t have any significant impact on the currency exchange rate.

[PCMNewsdesk]

There are two points to be considered:



When there is news which is important for an economy, it is not required that the same importance comes up in another economy.
U.S news have more importance because it is the biggest economy in the world and due to the value of its currency the news could have impact on the exchange rates of the other currencies.


News Indicators:
The most influential data are for the U.S in the currency market, hence let’s get started with this economy and review their influence based on the impact of each data on the macroeconomic indices.
At the end, the important economic indicators for the countries, their currencies between the major ones will be introduced.

[PCMNewsdesk]

U.S News Indices: Gross Domestic Production (GDP)
This data has a lot of long and short term impacts on the currency exchange rate and reveals boom and deflation periods. This news shows the overall economic condition of a country in terms of deflation and prosperity.
Tip: Decreasing the rate of GDP doesn’t mean bad economic condition, but having it in negative territory shows poor economic status and deflation.
Gross Domestic Production is usually released as an annualized percentage, based on quarterly changes of data. However, the news index is released three times: Preliminary, Final and Advanced.
The advanced version has more priority compared to other two indices, as this data has a precedence.
Tip: Most economic news are important, as they have impact on GDP.

Impact: A+
Release Time: A day of the fourth week of the new quarter at 08:30 (EST)
Period: Quarterly
Relevance: Directly with the Currency, Stocks and Commodity markets, inversely with the bond market

[PCMNewsdesk]

U.S News Indices: Institute for Supply Management
This index assesses the condition of the industry through a survey on 250 industrial companies’ CEOs in field of 21 industry of 50 U.S. states.
This is one of the important indices regarding the condition of the construction agencies and the industry that reflects its status and perspective from the managers’ point of view.
ISM index is constituted of a weighted average of five subcategory which has been noted below:
New Industry Orders, Production, Employment, Goods Delivery Time and inventories.
This is a leading index which reveals the view of the managers about the economic condition.
This is connected directly to the dollar and its improvement could lead the dollar appreciates and it is so sensitive during the gyration of every business and shows inflation, employment and growth condition.
Jobs and inflation data within this index could be reviewed as leading data towards releasing each of indices’ data.
The middle point for this index is 50 and the higher, the better economic condition from the CEOs views. The lower from 50, the more inadequate economic condition.
ISM index is released in two types to the market:



ISM Manufacturing

Which it has been discussed earlier and it reveals how well manufacturing factories are.



ISM Non- Manufacturing ( Service )

Which has lower importance than the first one. It is a kind of report that surveys 370 companies on services (Financial, Insurance, Real Estate, Communications, Public Services and facilities).

Impact: First one (B+) and the second one (B-)
Release Time: The first working day of the month at 10:00 (EST)
Period: Monthly

[PCMNewsdesk]

U.S New Indices: Philadelphia Fed Survey

This index reveals the economic condition through a survey by Philadelphia Fed on businesses managers in regions like Pennsylvania, New Jersey and Delavera.
Why this is important to the market:
Philadelphia is the third industrial state of the U.S
It is released earlier than ISM indices.
In fact, it gives an outlook on production and business in manufacturing sector.
The border is zero (0) – known as psycho level too. Percentage of positive changes show improving condition and percentage of negative changes show deflationary condition.

Impact: B
Release Time: The third Thursday of the new month at 12:00 (EST)
Period: Monthly
Relevance: Directly with the Currency, Stocks and Commodity markets, inversely with the bond market

[PCMNewsdesk]

U.S News Indices: Durable Goods Orders

This index shows how much durable goods orders have been registered.
Durable goods are the goods that have a life more than 3 years like Computers, Electrical devices, Electrical equipment (system), Airplanes and so on.
This index reveals optimism/pessimism sentiments of big investments and the whole orders. This is a very good gauge to measure the big investors’ sentiment regarding to the long term economic condition to order durable goods. This index shows a clear view of investors to order and the people to buy important and essential goods as people either remove or prolong a lot of expensive and durable goods form their shopping lists during deflation periods.

If demand decreases: there will be two modes:


A part of manpower will be amended to decrease the costs.
The same goods would be produced and stocked by the same number of workforce and this will cause an increase to the inventory.


In periods of prosperity, as this index has big movements during different seasons and based on the people’s view, it counts for an unstable and volatile index.
There are two major problems:


Index numbers has a high volatility, specially orders for defensive goods
Generally, it is largely revised (for the previous release)


The released number shows the percentage of changes form the last month. For the subsidiary of this index, durable goods orders is released excluding transportation stuffs. This index has lower volatility band compared to the core durable goods orders index as goods regarding to transportation like building a plane has mass orders with high costs.

Tip: To have it reviewed more accurate, usually economists consider 3 month average instead of monthly index

Impact: B-
Release Time: Three to four weeks after the new month begins at 08:30 (EST)
Period: Monthly
Relevance: Directly with the Currency, Stocks and Commodity markets, inversely with the bond market

[PCMNewsdesk]

U.S News Indices: Consumer Confidence

The consumer confidence is an assessment/evaluation index of economic condition on business, job and personal income which is based on a survey of the prospect of 5000 persons (institutions) form whole consumers.

Tip: This is getting more attention during political/financial crisis.

Consumer confidence has a close and direct relation with the consumer’s costs, and the more this index helps the economic condition improves, the more would be consumed.
In the other words, this index is the result of a survey that the consumers has been requested to assess the future economic outlook. Higher numbers show more optimism from consumers. The more they are optimist, the more they intend to go shopping and using services, and thus the economic condition will be better.
This is index is consisted of two following part:



Assessment of the current consumer condition (40%)
Assessment of the future of the household and their expenditure (60%)


Impact: B-
Release Time: The last Tuesday of the month at 10:00 (EST)
Period: Monthly
Relevance: Directly with the Currency, Stocks and Commodity markets, inversely with the bond market

[PCMNewsdesk]

U.S News Indicators: Chicago PMI Index

This indicator measures the business climate as a monthly basis survey on the managers in Illinois, Indiana and Michigan.
The importance is lower than ISM PMI (this is counted as a local type index)
The border figure is 50, higher than 50 shows business is performing well which leads to a stronger dollar and below 50 shows a weakening economy which ends to a falling dollar.

We have to consider the results accurately while trading because of the following reason:
As managers do their job and they are aware of the macro-status of the factories, they do provide important performance data about the overall economy. Therefore, it could be counted as a leading indicator on economic performance.

Impact: B-
Release Time: The last day of the month at 10:00 (EST)
Period: Monthly
Relevance: Directly related with the Currency, Stocks and Commodity markets, inversely related with the bond market

[PCMNewsdesk]

U.S News Indicators: CPI: Consumer Price Index

This index measures the inflation in the consumer and household section and it is a base indicator to calculate the inflation nationwide.
The CPI simply shows the buying power of the dollar against goods and services. It shows the rate of price changes of a basket of goods and services in which the most costs of a household expenditures are accounted for.
As the inflation accounts for a negative data for an economy and lower the buying power of the consumers, the central bank pay close attention to the inflationary condition.
In case of increasing the inflation, the simple and the most powerful strategy to curb it is raising the interest rates. Nevertheless, the central bank monitors the inflationary status in different sections very closely.

In the U.S. the consumer price index is consisted of 200 goods and services which fall into 8 categories.

These 8 categories have diversified weighs to get the inflation calculated as follows:

Housing, transportation, food, health care, education and communication, entertainment, apparel, service and so on.
Beside CPI index, there is also Core CPI released which in fact is same to CPI, but exclude energy and food data as they are very volatile. Therefore, the Core index has more accurate data to be used as an analytical tool while trading exchange rate.

Impact: B+
Release Time: Up to the fifteenth day of the month at 08:30 (EST)
Period: Monthly
Relevance: Directly related with the Currency, Stocks and Commodity markets, inversely related with the bond market

[PCMNewsdesk]

U.S News Indicators: PPI - Producer Price Index

This indicator determines the changes in the costs regarding a producer, in fact it is an indication of inflation in initial manufacturing factors.
Manufacturers seek to reduce their costs to increase the power of winning in a competition and could make more benefit out of it.
As manufacturers increase the price of their products and services, if the index fuels up, it would lead to an increase in CPI index, weakening the consumer and having the dollar’s buying power down.
That’s why similar to CPI this index has an inverse relevance to the dollar as well.
Of course, note that very low level or negative figure for the index is an indication of deflation and this is the case to have the value of the dollar down as well.

Important consideration:
The market’s concentration on the index usually excludes food and energy costs.
That is why most of the countries have to buy the energy from overseas and global energy price changes has much effects on CPI and PPI indices.
In order to get a clearer and true view of inflation and inflationary forces of productive economies and service economies, these two factors will be removed and there will be a “Core” before the index such as Core CPI or Core PPI.

Impact: B
Release Time: ninth to twelfth of the month prior to CPI release at 08:30 (EST)
Period: Monthly
Relevance: Directly related with the Currency, Stocks and Commodity markets, inversely related with the bond market

[PCMNewsdesk]

U.S News Indices: Change in Non-farm Payrolls (NFP)

One of the most important economic U.S. indices is regarding to labor market indicators within the country.
These indices is about net hiring, unemployment rate, the labor weekly working hours, wages and so on.
This index shows the net employment in Non-farm sectors. It means that the total unemployed persons will be deducted from the total employed people during the month to get the net Non-farm employment sectors. This index is published based on thousand persons unit, meaning that if it shows 140k+, that calls for a net 140000 persons hiring during the previous month and this is deducted from unemployed people.

Tip: The total Nonfarm-payrolls fall into several subgroups as follows:


Factory products

Mining
Service and the state

Housing and Roads Development
Market
Healthcare and Education

The most important sector is the payrolls in factory products sector which usually constitutes the basis of the business in the most part of the national production including working hours, overtime working and the hourly average income/earning. There are two reasons which makes the weekly average working hours very important and it is considerable to be reviewed.
In fact, by reviewing the index, contractors understand they are encountering with lack of workforce tough condition, because they cannot find the person they are looking for

Increasing the rate of wages for employees of a country means progress to the economy and as a result strengthening of the currency. If the actual reading is lower than forecasted would weaken the currency and that happen inversely would lead to have a stronger currency.
As the employment indices has a bold rule in the U.S. economy, having it overvalued will lead to inflationary pressures, and instead having it undervalued and getting to negative figures is an obvious indication of deflation and recession. This index has a direct and close relativity with the dollar rate.

Impact: A
Release Time: The first Friday of the month, at 08:30 (EST)
Period: Monthly
Relevance: Directly related with the Currency, Stocks and Commodity markets, inversely related with the bond market

[PCMNewsdesk]

U.S News Indices: Unemployment Rate
The principle and major indicator of current labor market conditions is the unemployment rate. However, in the short-term, effects of NFP (Non-Farm Payroll) index is more evident. But in the longer run, it is the unemployment rate that gives the clear picture of the employment status.
The reason unemployment rate is important than Core NFP index is that unemployment rate is a survey performed on the employment status of people, but the second Core index is surveyed on the businesses and manufacturers.
Unemployment rate is calculated by dividing jobless people to the total workforce willing and able to work in percent. Overall, low unemployment rate brings a pressure leading to inflation and high rate suggests deflation.
Target zone for unemployment rate is %4-%6. Unemployment rate above the target zone due to decline in spending, tax evasion, increase in criminal activities and lower investments leads to deflation and stops or slows the economy from growing. Unemployment rate below target zone is even worse for businesses as it prevents hiring expert workforce for economic growth. This index is directly proportional to the dollar value.

Impact: B+
Release Time: The first Friday of the month, at 08:30 (EST)
Period: Monthly
Relevance: Directly related with the Currency, Stocks and Commodity markets, inversely related with the bond market.

[PCMNewsdesk]

U.S News Indices: Manufacturing Payrolls

This index determines how much the wages are in the overall manufacturing sector.
The higher the wages, the better the condition of the businesses are and therefore it is expected to have an improved business and higher inflation in long term. However, the lower the index is the more unfavorable business condition become and the inflation falls.
This index is not very important.

Impact: C
Release Time: The first Friday of the month, at 08:30 (EST)
Period: Monthly
Relevance: Directly related with the Currency, Stocks and Commodity markets, inversely related with the bond market

[PCMNewsdesk]

U.S News Indices: Average Hourly Earnings

This index shows how much every American gets paid for one hour of work.
The higher the index is, the better the level of prosperity of the population would be. A sharp increase in the index leads to inflation though.

Impact: B
Release Time: The first Friday of the month, at 08:30 (EST)
Period: Monthly
Relevance: Directly related with the Currency, Stocks and Commodity markets, inversely related with the bond market

[PCMNewsdesk]

U.S News Indices: Retail Sales

This index surveys the rate of retail sales to consumers and households.
In fact, it shows the percentage of total income changes in retail stores and it consists of:



Durable goods (including non-industrial goods like non consumptive home appliances and so on with over 1 year lifetime)
Usual/Ordinary goods (including industrial goods and consumptive ones and so on)


As this index reveals optimally the consumer confidence and its demand monthly accounts for the major news.
There are two reasons for its importance:



The final consumer spending is considerable in the U.S, because it reserves one third of the GDP.
Another reason that makes it important is that its monthly release is earlier than GDP, which somehow shows the view and the expectation for the GDP data to be released.


Key Tip: In this report, the service sector and inflation condition is not considered while it could be intended to change.
Key Tip: If the GDP results are awaited, this news will be under more focus.
Key Tip: It should be noted that gathering data for this report is very hard in countries having improper hardware and software infrastructure. In addition, this report usually is produced based on normal and unreal figures, because the retail store owners may not provide real and true figures of their income for tax evasion.

Impact: B+
Release Time: Between 10th-13th of the month, at 08:30 (EST)
Period: Monthly
Relevance: Directly related with the Currency, Stocks and Commodity markets, inversely related with the bond market.

[PCMNewsdesk]

U.S News Indices: New building permits

This data is important as getting a new building permit is the very first step in the construction process.Because of the higher costs associated with home building, an increase in new building permits is an obvious sign for higher investment.
This index gives an overall view on economic conditions and is related to many other economic reports including durable goods, retail sales and more important the GDP.

Key Tip: This news is among the leading economic reports related to deflation and prosperity. During deflationit is more important because it shows how to get out of deflation earlier than other data.

Impact: C+
Release Time: Between 15th-17th of the month, at 08:30 (EST)
Period: Monthly
Relevance: Directly related with the Currency, Stocks and Commodity markets, inversely related with the bond market.

[PCMNewsdesk]

U.S News Indices: FOMC Rate Decision

The interest rate report is an index that the Federal Reserve publishes eight times a year.
This news index reveals what level the central bank defines as the benchmark interest rate.
Changing the rate has huge impact on mortgages, bonds and FX markets. The interest rate policies are based on all economic conditions.

Key Tip:Besides announcing interest rate, the Federal report is much important as it is about Fed’s outlook on overall current economic conditions and future plans.
Key Tip: Monetary policies are defined based on interest rate decisions. These policies either dampen inflation or fight deflation with target to improve labour market.

Impact: A+
Release Time: 8 times a year on Tuesday or Wednesday at 14:00 (EST)
Period: one and half month once

[PCMNewsdesk]

U.S News Indices: (ITC) Net Foreign Security Purchases

This news shows the net capital inflow to the U.S.
The most part of the net inflow and outflow is for bonds and government guaranteed bonds and has a high reliability.

Impact: B+
Release Time: the second or the third week of the month at 09:00 (EST)
Period: Monthly

[PCMNewsdesk]

U.S News Indices:Trade Balance <br />
Trade Balance shows the difference between total value of imports and total value of exports of a nation. <br />
Trade balance is one the most important part of “Balance of...

[acushnir]

Thanks for this amazing informative guide!
It's really very usefull!
I'll try to take the best advantage of it.
Thanks again!

[PCMNewsdesk]

The England News Indices: GDP

The most important news released in Britain is GDP.
Its calculation and comments issame as the one in the U.S and has a high impact on Sterling.

Impact: A+
Release Time: The third to fourth week of the new season at 08:30 (GMT)
Period: Quarterly

[PCMNewsdesk]

The England News Indices:Trade Balance

Trade Balance shows the difference between imports and exports of the nation.
Trade balance is one the most important part of “Balance of Payments. It has a great impact on the value of the Pound.
Positive figures show the higher Sterling dominated value on exported goods against the imported values. The negative trade balance shows the lower value of exported goods against imported values which is called trade deficit.
Negative trade balance is known as trade deficit which shows the amount of Sterling going out of the nation is greater than the amount coming in. Except, it is covered by the country’s net inflow. The data is released according to billion Pound.
Considerable changes in the data has high impacts on the currency.

Impact: B
Release Time: On 9th – 14th of the month at 08:30 (GMT)
Period: Monthly

[Danielpeters]

I don't understand what you say.

[Sameeh]

These are good informations for the beginners and experienced traders and let us to know more about forex and the factors affects it and so we can read the news and its effect on the market with high percentage of success, and so this will decrease the risk and let us to determine the direction of movement of the market during news release and after release, for me i avoid trading with the news because it is risky for me and i failed before trading with news and got much loses and so i see the calendar first to see if news is coming or not and then if there is a news i wait until the effect of the news end then start to trade or put pending orders up and down then wait to see where the market will go and which order will be activated.

[FXOpen Trader]

These are good informations for the beginners and experienced traders and let us to know more about forex and the factors affects it and so we can read the news and its effect on the market with high percentage of success, and so this will decrease the risk and let us to determine the direction of movement of the market during news release and after release, for me i avoid trading with the news because it is risky for me and i failed before trading with news and got much loses and so i see the calendar first to see if news is coming or not and then if there is a news i wait until the effect of the news end then start to trade or put pending orders up and down then wait to see where the market will go and which order will be activated.

When we are trading with the help of the News we must understand that it is very Risky for us.

[FXOpen Trader]

When we are trading with the help of the News we must understand that it is very Risky for us.

We will need to understand the importance of news based trading.