The housing market has become an increasingly important facto in guaging the overall economic outlook as real estate valuations can have an impact both on consumer confidence and actual spending power.

Housing market statistics take a number of different forms from housing starts to existing home sales. In recent years new home sales have been the fastest growing sectors in the US and UK economies but since the sub-prime collapse have declined sharply.

The retail sales reports are a primary indicator of personal spending and are therefore watched closely by the forex markets.

The forex market focuses on the core headline figure to get an idea of how the consumer is behaving but the retail sales reports can get widely distorted.

Bad weather can impair consumer mobility or alter shopping patterns and petrol price hikes can have a distorting effect.

The forex market attempts to interpret future consumer activity (i.e. spending) depending on consumer sentiment.  The idea being that if consumers feel good they spend more and if they feel bad they will spend less.

It’s all a bit subjective and consumer sentiment is more often impacted by the price of fuel or the stock market, etc.

Trade and current account balances are two of the most important reports for forex market traders as they have both direct and potentially long-term implications.

Trade Balance: This report measures the difference between a nation’s imports and exports. If a nation imports more than it exports then it will have a trade deficit. If a nation exports more than it imports then it will have a trade surplus.

Gross Domestic Product (GDP) measures the total amount of economic activity in an economy over a specified period usually quarterly and adjusted for inflation.

The percentage change in GDP from one period to the next is seen as the primary growth of an economy. In most countries GDP is reported on a quarterly basis and is essentially a big picture check on overall economic growth.

Inflation reports are used by forex traders to monitor the overall changes in the prices of goods and services and are key inputs to determining monetary policy expectations.

Increases in inflation are likely to be met with higher interest rates as central bank policy makers seek to keep inflation in check, whilst moderating or declining inflation would suggest lower interest rate expectations.

There are a number of different inflation measures:-

Forex trading structural indicators frequently form the basis for currency trends and are most important to medium to long-term forex traders.

Inflation: Inflations rates, whether rising or falling, are important indicators for the direction of interest rates which is a key determinant of currency values.

Growth: Indicators of growth and economic activity tell forex traders whether an economy is expanding or contracting and by how much and how quickly. This is another key input into monetary policy and interest rates.

After personal consumption, business and firms make up the another third of overall economic activity in a country’s economy.

Businesses contribute directly to economic activity via capital expenditure, such as spending on buildings, factories, stores and offices, buying IT and communications equipment and software. They also contribute indirectly through growth by hiring staff, expanding production and making investment opportunities.

The state of the labor market is one of the first and most important considerations for the forex trader.

Jobs and job creation are one of the keys to medium and long term economic outlook for any country. If jobs are being created then more wages are being paid, consumers will consume more and economic activity expands. Conversely if job growth is slow then long term economic growth will be restrained.

As a forex trader it’s important to understand forex trading economics.

Most people have a reasonable idea of what certain economic reports mean. Economic data such as the unemployment rate or consumer price index. But most people don’t necessarily understand how to put it together to make sense of it.

A fundamental forex trading model is critical to understand how you, and the market, should interpret the data so that you can factor in any given report into the overall picture.