Forex Trading Consumer Spending Indicators
Forex trading consumer indicators tell us about important economic factors and give us important information that can be used for fundamental analysis. In this guide we will teach you about the most important Forex trading consumer indicators:
- The Consumer Price Index
- The Consumer Credit
Fundamental Analysis with The Consumer Price Index (CPI)
Definition - The Consumer Price Index, or CPI, is a consumer indicator that measures the average price of a fixed basket of goods and services that consumer purchase. Changes of the CPI influence inflation levels, that in turn affect the Forex trading currency price.
Importance of the CPI - The consumer price index is the most widely used Forex trading indicator. By tracking the changes in prices of commodities, you can foresee currency changes. Because most investors do not read about CPI changes and other indicators when they decide how to invest, using this indicator will place you above other investors. Forex trading Consumer spending accounts for about 65% of all economic activity, and this is why the CPI influences Forex currency prices so much.
Using the CPI to invest - If the CPI rises then interest rates are expected to rise, along with a short term rise of Forex trading currency prices. However, this with increase inflation levels on the longer term and eventually cause a decrease in currency price.
Important note - Do not include food and energy prices when you use the CPI for fundamental analysis. Use only the "core CPI" for the analysis.
| CPI | Meaning | Short term affect on currency | Long term affect on inflation |
| Increase | Commodities cost more | Currency rises | Currency drops |
| Decrease | Commodities cost less | Currency drops | Currency rises |
Fundamental Analysis with Consumer Credit Indicator
The consumer credit index is a monthly Forex trading consumer indicator that is published every fifth business day of the month by the federal reserve. This indicator points to the finances of consumers, which can hint on Forex trading currency direction.
Importance of consumer Credit - This indicator can be confusing to the beginner Forex investor because when it rises it can have both negative and positive implications on Forex trading. If people use their credit more it can mean an increase in economic activity and encourage currency prices. On the other hand, if too much dept is accumulated relative to income levels, economic activity may decrease in order to ensure the return of debts, which in turn might lower the currency price.
Using consumer spending to invest - using this index must be related to the specific economic situation, and this is why only investors who are well acquainted in the country's economy should use this indicator for investment. This indicator should be used for longer term investment on the Forex trading market.
Forex trading Consumer spending indicators should be incorporated in your Forex Currency Trading System, so you'll be able to make the right choices when trading.
Sam Davis - Executive Editor
