Thursday, 26/05/2022 | 21:55 GMT-0
26/05/2022 | 21:55 GMT-0
Coming up at 1230 GMT from the US on Friday, 27 May 2022:
- April Core PCE price index, used as an indication to inflation
Inflation
Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply in relation to the wealth produced (measured with GDP). As such, this generates pressure of demand on a supply that does not increase at the same rate. The consumer price index then increases, generating inflation.How Does Inflation Affect Forex?The level of inflation has a direct impact on the exchange rate between two currencies on several levels.This includes purchasing power parity, which attempts to compare different purchasing powers of each country according to the general price level. In doing so, this makes it possible to determine the country with the most expensive cost of living.The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates on the forex market.Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on foreign exchange. Conversely, inflation that is too low (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the forex market.
Inflation is defined as a quantitative measure of the rate in which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general level of prices where a given currency effectively buys less than it did in prior periods.In terms of assessing the strength or currencies, and by extension foreign exchange, inflation or measures of it are extremely influential. Inflation stems from the overall creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply in relation to the wealth produced (measured with GDP). As such, this generates pressure of demand on a supply that does not increase at the same rate. The consumer price index then increases, generating inflation.How Does Inflation Affect Forex?The level of inflation has a direct impact on the exchange rate between two currencies on several levels.This includes purchasing power parity, which attempts to compare different purchasing powers of each country according to the general price level. In doing so, this makes it possible to determine the country with the most expensive cost of living.The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates on the forex market.Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on foreign exchange. Conversely, inflation that is too low (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the forex market.
Read this Term - This is a less volatile measure of the PCE price index, it strips out food and energy prices
- Published by the US Bureau of Economic Analysis
Goldman Sachs forecast is a little under the consensus (see pic of calendar below):
- +0.21% m.m, ” now corresponding to a year-over-year rate of +4.74%”
This snapshot from the ForexLive economic data
Economic Data
Economic data typically comes in the form of news releases that are disseminated daily. This information is extremely valuable to retail and institutional forex traders, given the influence such data has on currency rates.Most of the major economic events that are released are reported by sovereign governments throughout the globe. Moreover, there are several economic data points that are released by private organizations that can also move the market.By and large, when new information becomes available the value of a currency pair will change to reflect a potentially new equilibrium created by traders. This information that changes the value of a currency pair can ultimately come in many forms, with economic indicators or data being primary drivers.Why Economic Data Matters in ForexEconomic data is an important barometer that investors can use to measure the performance of an economy. This in turn can influence currency rates.For example, the stronger the economic data, the more likely growth will rise in the country, causing a currency to strengthen. If Gross Domestic Product (GDP) growth in the United States is high, this will help cause the US dollar to rise in value.The reverse is also true. Typically, weaker economic data can forecast a slowing of growth. What traders’ attempt, when trading economic data is to measure how economic indicators are perceived relative to expectations.Before nearly every economic release, the market generally prices in is the median expectation reflected by analysts and economists. These known variables are simply expectations, and the unknown is the actual release. Since currency pairs can move significantly based on new data, traders are always trying to anticipate where the actual figures will come in upon release.Changes to economic data will also filter down to potential changes to interest rates by a central bank. Overall, economic announcements from the United States and Eurozone are heavily watched as they will influence the perceptions of market participants which help drive interest rates and other monetary policy by the Federal Reserve or European Central Bank (ECB) respectively.
Economic data typically comes in the form of news releases that are disseminated daily. This information is extremely valuable to retail and institutional forex traders, given the influence such data has on currency rates.Most of the major economic events that are released are reported by sovereign governments throughout the globe. Moreover, there are several economic data points that are released by private organizations that can also move the market.By and large, when new information becomes available the value of a currency pair will change to reflect a potentially new equilibrium created by traders. This information that changes the value of a currency pair can ultimately come in many forms, with economic indicators or data being primary drivers.Why Economic Data Matters in ForexEconomic data is an important barometer that investors can use to measure the performance of an economy. This in turn can influence currency rates.For example, the stronger the economic data, the more likely growth will rise in the country, causing a currency to strengthen. If Gross Domestic Product (GDP) growth in the United States is high, this will help cause the US dollar to rise in value.The reverse is also true. Typically, weaker economic data can forecast a slowing of growth. What traders’ attempt, when trading economic data is to measure how economic indicators are perceived relative to expectations.Before nearly every economic release, the market generally prices in is the median expectation reflected by analysts and economists. These known variables are simply expectations, and the unknown is the actual release. Since currency pairs can move significantly based on new data, traders are always trying to anticipate where the actual figures will come in upon release.Changes to economic data will also filter down to potential changes to interest rates by a central bank. Overall, economic announcements from the United States and Eurozone are heavily watched as they will influence the perceptions of market participants which help drive interest rates and other monetary policy by the Federal Reserve or European Central Bank (ECB) respectively.
Read this Term calendar, access it here .
The times in the left-most column are GMT.
The numbers in the right-most column are the ‘prior’ (previous month) result.
The number in the column next to that, where is a number, is the consensus median expected.
Under 5% would be the first time in 2022:
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