• The impact of economic factors on the exchange rate

    read:2023/2/26 7:16:00

    GNP forextradingaccountsregister the total value of all fforextradingaccountstypeal goods forex trading accounts services produced by a country in a certain period of time, is the most basic of the economic indicators, it reflects the overall economic situation of a country GNP consists of four main components: consumption, investment, government spending and net exports The relationship between them is: GNP = consumption + investment + government spending + (Exports - Imports) Whether a country or regions economy is in a growth or recession phase can be observed from the changes in GNP. A significant increase in GNP reflects the cashback forex booming economy, increased national income, and increased spending power, the countrys government will likely raise interest rates, tighten the money supply, and the attractiveness of the countrys currency increases, leading to an increase in the exchange rate of its currency; conversely, if A negative growth in a countrys GNP means that the countrys production has turned weak, the economy is in recession, and its consumption power is reduced, the government may lower interest rates in this case to stimulate economic growth, and the attractiveness of the countrys currency decreases when interest rates fall coupled with the countrys poor economic performance Generally, if a countrys GNP falls for two consecutive quarters, it is considered to have entered an economic recession II. Inflation inflation is also an important factor affecting the exchange rate, reflecting the inflation of many economic indicators, commonly used are: 1. production price index production price index mainly reflects the cost of production of goods, that is, the price of raw materials for the production of change in the situation, used to measure the price of various commodities in different stages of production changes in the situation of the indicator of the future consumer price rise or fall has a great impact, is also a predictor of consumer The relationship between the PPI and the exchange rate is very delicate and capricious. If the PPI is higher than expected, there is a possibility of inflation and the authorities will implement a tight monetary policy, in which case the exchange rate of the countrys currency may rise; however, if the authorities are in other considerations, there is no tightening of the monetary policy, the exchange rate of the countrys currency may fall 2. The Consumer Price Index (CPI) reflects the price of goods and services paid by urban consumers, and is a widely used tool to respond to inflation, generally as a percentage. If inflation is under control, interest rates may also tend to fall, which will be beneficial to the countrys currency. The retail price index reflects the average change in the price of retail goods, unlike the consumer price index, which is weighted according to the weight of different goods in consumption, and it reflects the change in peoples cost of living 4. wholesale price index The wholesale price index reflects the changes in wholesale prices, and its content is basically the same as the retail price index, and its calculation method is simpler, in the absence of the retail price index, the wholesale price index can be used to analyze the inflation situation instead. When the level of interest rates in a country rises, the interest earnings of investors holding the countrys currency increases, leading to an increase in the demand for the national currency; at the same time, it causes short-term capital flows to the country, while the countrys capital outflow decreases, leading to an improvement in the balance of payments capital account, the exchange rate of the national currency rises Conversely, if the level of interest rates in a country falls, the interest earnings of investors holding the countrys currency decreases, and the demand for the currency will At the same time, it causes short-term capital to flow abroad, while the capital inflow decreases, leading to the deterioration of the balance of payments capital account, causing the exchange rate to fall. Therefore, the increase in employment reflects the economic prosperity of a country and is a positive for the exchange rate of the countrys currency. Personal income includes all income from wages, i.e., social benefits or other means of total income, personal income is the source of personal consumption, reflecting the actual level of purchasing power of individuals, forecasting the future consumer demand for goods and services changes in personal income will also affect the balance of payments current account and exchange rate. Conversely, a decline in the level of personal income will cause a decrease in demand for imported products and a decline in the foreign exchange rate. Industrial orders Industrial orders reflect a countrys industrial production and sales, including durable goods orders and non-durable goods orders The indicator reflects the good or bad manufacturing production situation, manufacturing manufacturers usually receive orders before scheduling production, so the indicator is also seen as a harbinger of the next production activities When durable goods orders are significantly reduced, reflecting the weakness of the manufacturing sector, the next period of reduced production, which may lead to unemployment Conversely, when durable goods orders increase, it reflects the good economic development of the country, which is beneficial to the countrys currency. Commercial inventory and sales of commercial inventory is in a state of reserve of goods produced by the factory will not immediately through the circulation of all the goods into personal consumption or production and consumption, a part to be stored for production and sales, so business enterprises to maintain a certain amount of commercial inventory is to maintain and expand the reproduction and business scope of an important condition, but the significant increase or decrease in the amount of inventory and market conditions and economic In a period of high economic development, if commercial inventories suddenly increase, it indicates that the economic development will be blocked and may enter stagnation or recession; in a period of low economic development, if commercial inventories suddenly decrease, it indicates that the economic development has signs of improvement. Foreign trade balance figures between countries and merchandise trade, is an important part of economic activities, countries are regularly published a certain period of trade figures if a country often have a trade deficit, means that the national income outflow, so that the countrys economy turned weak, the government in order to improve the situation, often to devalue the currency to improve export competitiveness Therefore, when a countrys trade deficit widens, the exchange rate of the countrys currency will fall. Conversely, when there is a surplus in foreign trade, the exchange rate of that countrys currency tends to rise