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Forex Trading: Commonly Used Indexes Part 2
• ANZ Commodity Price Index • Consumer Confidence Index • Consumer Price Index • Core PCE Price Index • Employment Cost Index • Ivey Purchasing Managers Index • PCE Price Index • Philadelphia Fed Index • Producer Price Index Understanding how these indexes work can help improve your trading techniques. You can decide which fit into your style of forex trading, and which to overlook. Below the Ivey Purchasing Managers Index, the Consumer Price Index (CPI), and the Producer Price Index will be discussed. Ivey Purchasing Managers Index The Ivey Purchasing Managers Index (PMI) is a unique index that measures purchases made by corporate executives. It indicates the level of change in purchasing and answers that question “are corporate executives purchasing more or less for expansion than they were the previous quarter/year”? It measures corporate confidence through factory production. If we’re making more, we’re selling more, or at least anticipating selling more. A PMI in the range above 50 can indicate economic growth or expansion, while a PMI below the 50 range can indicate economic contraction or stagnation. The take away for FX trading is that economic growth can increase the value of the currency. The Ivey is released on the first business day of each month by the Institute for Supply Management. It is not as strong of a predictor of inflation as the CPI, but it’s released much earlier in the month and can provide timely signals for forex brokers Consumer Price Index The Consumer Price Index (CPI) measures the change in price of a bundle of specific goods and services in a specific country. Price changes from industries such as food, housing, medical care, clothing, education, transportation, and entertainment are calculated. This index helps to measure inflation, as experienced by a sustained rise in prices for day-to-day living expenses. Updates for the CPI are released monthly, usually in the second or third week. The CPI is always released after the Producer Price Index. The key takeaway from this is that when inflation rises, central banks have to raise interest rates; high interest rates are bullish for a country’s currency value on forex trading platforms. Producer Price Index The Producer Price Index (PPI) is another index that measures changes in prices of various consumer goods. Similar to the Consumer Price Index, this index helps measure inflation. Whereas the CPI helps measure current inflation, the Producer Price Index is a great indicator for predicting future price inflation. Unlike the CPI, the PPI includes goods that are still in production (i.e. a product that isn’t necessarily a finished good ready for retail sale, but it is used to make a finished good ready for retail sale). Although some forex traders like to use the PPI as an indicator, it is important to keep in mind that the PPI does not factor in any imported goods. To calculate the PPI, surveys are mailed to businesses by random selection. The surveys ask for actual transaction prices on certain products. The index is expressed in percentage form, revealing the overall changes in price from the previous month and previous year. The monthly release date of the PPI varies from country to country. Practice Forex Trading If you are new to FX trading, but would like to learn how to invest, read indexes, and understand forex resources, get started with a free forex demo account. These accounts allow you to practice without making a real investment, so that when you are ready to use actual money, you will be more likely to earn a profit. Article Directory: http://www.articledashboard.com Patrick Kalashnikov is a freelance writer who is knowledgeable about FX trading,and how to get started with a forex broker. For more information about forex trading, visit vertifx.com and check out www.vertifx.com/forex-blog/2011/06/forex-trading-indexes-part-2/ to view this original blog. |
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