Forex Education

Fed Raises Discount Rate - An increase in the borrowing rate for banks from the Fed usually result in increased rates for banks' clients. This action is used to slow credit expansion.

Market Impact: Market price of foreign currency relative to USD to fall.

Fed Buys Bills - Fed adds to banking system reserves that may lead to a drop in rates.

Market Impact: Market price of foreign currency relative to USD to go up.

Consumer Price Index (CPI) Rises - Reflects the trend of the average price of consumer goods. This figure is positively related to inflation and if the CPI rises this indicates rising inflation.

Market Impact: a. Increase in gold prices.
b. Market price of foreign currency relative to USD may fall.

Durable Goods Order Rises - Pickup in business activity usually leads to increased credit demand. This may subsequently cause interest rates to rise.
Market Impact: Market price of foreign currency relative to USD to decrease.

Gross National Product (GNP) Falls - This figure reflects the growth and the economic situation of a country. If GNP falls, this reflects a slowing economy. Fed may loosen money supply prompting a decline in interest rate.
Market Impact: Market price of foreign currency relative to USD to rise.

Housing Starts Rise - Shows growth in economy and increased credit demand. Fed less accommodating and any attempt tightening by allowing interest rates to rise.
Market Impact: Market price of foreign currency relative to USD to drop

Industrial Production Falls - This indicates slowing economic growth. Fed may be more accommodating in allowing interest rates to fall to stimulate the economy.
Market Impact: Market price of foreign currency relative to the USD to go up.

Inventories Up - This indicates a slowing economy since sales are not keeping up with production.
Market Impact: Market price of foreign currency relative to USD to rise.

Leading Indicators Up - This signals strength in the economy leading to greater credit demand.
Market Impact: Market price of foreign currency relative to USD to go down.

Oil Price Falls - This reduces upward pressure on interest rates, thereby enhancing prices of debt securities.
Market Impact: Market price of foreign currency relative to USD to increase.

Personal Income Rises - The higher one's income, the more is consumed prompting increased demand and higher prices for consumer goods.
Market Impact: Market price of foreign currency relative to USD to drop.

Precious Metals Prices Fall - This reflects decreased inflation. Demand for inflation hedges abates.
Market Impact: a. Market price of foreign currency relative to USD to increase. b. Market price of gold to decrease

Producer Price Index Rises - This indicates rising inflation. Demand for goods rises as well as prices. Investors require higher rates of return. This pushes rates up.
Market Impact: a. Market price of foreign currency relative to USD to drop. b. Market price of gold to rise

Retail Sales Rise - This indicates stronger economic growth. Fed may have to tighten interest rates.
Market Impact: Market price of foreign currency relative to USD may drop.

Unemployment Rises - This indicates slow economic growth. Fed may ease credit, causing rates to drop.
Market Impact: Market price of foreign currency relative to USD to increase.

Fed Repurchase Agreements - Fed puts money into banking system by purchasing collateral and agreeing to resell later. This helps bring rates down.
Market Impact: Market price of foreign currency relative to USD to go up.

Fed Reserves of Matched Sales - Fed takes money from the system by selling collateral and agreeing to repurchase same at later date. This decrease in money supply generally raises interest rates.
Market Impact: Market price of foreign currency relative to USD to go down.

Money Supply Increases (M1, M2, M3) - Excess money supply growth potential can cause inflation and generate fears that the Fed may tighten money growth by allowing the Fed funds rates to rise which in turn, lowers future prices.
Market Impact: Market price of foreign currency relative to USD to drop.

Institute of Supply Management Index (ISM) - For retail, financial services, construction and other non-manufacturing businesses. An index reading of "anything over 55 is a strong number and signals expansion.