1. Nonfarm Payrolls Report
One of the most important monthly economic data points in a trader's diary is the release of the U.S. Non-Farm Payroll Report. This figure carries great significance for traders as it indicates job growth in the United States.
Start by looking at previous headline changes in U.S. Non-Farm Payroll. Traders will look at how the actual figure came out compared to the median estimate and the high and low ranges; this is also useful when looking at the unemployment rate.
The increase in nonfarm payroll employment indicates that the economy is improving and interest rates may rise, which is good for the U.S. dollar and indirectly bad for gold, vice versa.
With a few exceptions due to market holidays, nonfarm payroll data hits the newswires at 8:30 a.m. Eastern Time on the first Friday of every month.
There are several factors to think about when trading U.S. Non-Farm Payroll Report, but with a little insight and thorough preparation, it is an event that offers numerous opportunities for traders.
2.Federal Open Market Committee (FOMC)
The Federal Open Market Committee (FOMC) is the branch of the Federal Reserve System (FRS) that determines the direction of monetary policy specifically by directing open market operations (OMO).
The FOMC is composed of the Board of Governors, which has seven members, and five Federal Reserve Bank presidents.
The Committee has eight regularly scheduled meetings each year.
The FOMC may decide to increase, decrease or keep interest rates steady, having a tremendous effect on currency values.
3. Gross Domestic Product (GDP)
Gross Domestic Product (GDP) is one of the most important and most talked-about data points in the trading month. Assessing the value of finished goods and services produced by a country over a fixed period gives great insight into the actual growth of an economy.
When GDP grows sharply, its employment level is expected to rise, and companies are also expected to earn more profits, supporting stock price performance.
Higher-than-expected GDP data should be bullish for the U.S. dollar, and vice versa.
4. ISM Manufacturing Index
The ISM manufacturing index, also known as the purchasing managers' index (PMI), is a monthly indicator of U.S. economic activity based on a survey of purchasing managers at more than 300 manufacturing firms.
It is considered to be a key indicator of the state of the U.S. economy.
Formally called the Manufacturing ISM Report on Business, the survey is conducted by the Institute for Supply Management (ISM).
For each of the indicators measured (New Orders, Backlog of Orders, New Export Orders, Imports, Production, Supplier Deliveries, Inventories, Customers Inventories, Employment, and Prices), this report shows the percentage reporting each response, the net difference between the number of responses in the positive economic direction and the negative economic direction and the diffusion index.
A higher than expected reading should be taken as positive/bullish for the USD, while a lower than expected reading should be taken as negative/bearish for the USD.
5. Jobless claims
Initial jobless claims are a data point issued by the U.S. Department of Labor as part of its weekly Unemployment Insurance Weekly Claims Report. Initial jobless claims refer to claims for unemployment benefits filed by unemployed individuals with state unemployment agencies.
The report is released weekly at 08:30 Eastern Time on Thursdays. The data in the report is collected from state unemployment agencies who report the information to the Department of Labor's Office of Unemployment Insurance.
The weekly release of the report can be a market moving event. This report tracks how many new people have filed for unemployment benefits in the previous week. It is a good gauge of the U.S. job market. For instance, when more people file for unemployment benefits, fewer people have jobs, and vice versa.
Investors can use this report to gather pertinent information about the economy, but it's a very volatile data, so the four-week average of jobless claims is monitored.
6.The Importance of Consumer Confidence (CCI)
Consumer confidence surveys are critical indicators of the overall health of the economy. When people feel confident about the stability of their incomes, it influences their spending and saving activities.
The CCI survey is conducted monthly and contains about 50 questions that track different aspects of consumer attitudes toward current and future business conditions, current and future employment conditions, and total family income for the next six months. This report is highly regarded by the Fed and can be a key factor in determining U.S. monetary policy.
The University of Michigan's MCSI survey is conducted by phone and tracks consumer opinions of their finances and the near- and long-term economy. Preliminary data is released on or around the 10th of each month, with final and complete data released on or around the first of the following month.
By gauging consumer confidence surveys against sector-specific performance, traders and the Fed alike can gain a broader understanding of the consumer's view of the economy, while keeping an eye on the possibility of inflation.
7.Durable Goods Orders
Durable goods orders is a broad-based monthly survey conducted by the U.S. Census Bureau that measures current industrial activity and is used as an economic indicator by investors.
Durable goods orders provide more insight into the supply chain than most indicators and can be especially useful in helping investors understand the earnings in industries such as machinery, technology manufacturing, and transportation.
A high durable goods number indicates an economy on the upswing while a low number indicates a downward trajectory.
Durable goods orders are a key economic indicator for investors and others monitoring the health of economies. Because investment prices react to economic growth, it is important for investors to be able to recognize these trends. Orders for durable goods, for example, can provide information on how busy factories may be in the future and whether they'll likely need to employ more or less staff to get through current workloads.
8. Consumer Price Index (CPI)
The Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care. It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them. Changes in the CPI are used to assess price changes associated with the cost of living. The CPI is one of the most frequently used statistics for identifying periods of inflation or deflation.
The U.S. Bureau of Labor Statistics (BLS) reports the CPI on a monthly basis and has calculated it as far back as 1913.
The CPI gives the government, businesses, and citizens an idea about prices changes in the economy, and can act as a guide in order to make informed decisions about the economy.
When inflation is too high of course, it is not good for the economy or individuals.
For example, the CPI has risen by 2.3% in the past 12 months, which means that the cost of living has risen by an average of 2.3% compared to 12 months ago. When the cost of living increases, the value of your money decreases. Then, a $100 note received a year ago can only buy goods and services worth $[100/(1+2.3%)] today, that is, goods or services worth $97.75.
9. Housing Starts
The term housing starts refers to the number of new residential construction projects that begin during any particular month. As such, it is a key economic indicator. Housing start statistics are released on or around the 17th of each month by the U.S. Commerce Department.
The report includes building permits, housing starts, and housing completions data—all of which are compiled from surveys of homebuilders across the country.
Housing is a key part of the U.S. economy, which has an effect on related industries such as banking, the mortgage sector, raw materials, employment, construction, manufacturing, and real estate. In a strong economy, people are more likely to purchase new homes.
Conversely, people are less likely to buy new homes in a weak economy. This is what makes the New Residential Construction Report—commonly referred to as housing starts—a critical indicator of broader economic strength.
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