Top 5 reports that influence the british pound. Among a variety of currencies traded in the Forex market, the pound sterling (GBP) is indeed one of the most popular ones. If you just start to learn Forex, trading on popular currencies like GBP is surely a good idea. That’s why it is essential for you to know some significant reports that can have an effect on the British Pound or GBP.
The Top 5 Reports that Have an Effect on British Pound
The popularity of GBP in the Forex market is surely unquestionable. Considering that London is the biggest Forex hubs around the globe can be one of the proofs. Because of its popularity, a lot of new traders select GBP as their first currency to trade. If you consider using fundamental analysis when trading, here are some important reports that can influence the British Pound.
1. Prices and Inflation
First of all, there are prices and inflation which play important factor in the value of the British Pound. Generally, countries which have high inflation levels in relation to the other countries perceive their own currency value decrease more rather than to the other currencies. Additionally, inflation also typically causes a country’s central bank to take an action like adjusting interest rates.
To estimate the inflation level of the UK, traders usually follow the CPI (Consumer Price Index) which is created and launched by the Office for National Statistics. In this case, the CPI measures the modification in prices of services and goods bought by consumers in certain period. In addition, traders need to consider the PPI (Producer’s Price Index) as well for estimating inflation.
2. Monetary Policy
Monetary policy performed by the BOE, Bank of England is highly essential factor to consider by GBP traders. One of the primary mandates enacted by BOE is to support monetary stability determined by the bank as “confidence in the currency and low inflation”. To monitor the monetary policy, you need to follow the bank rate changes that can be discovered in BOE official website.
3. Confidence and Sentiment
Surveys which estimate market sentiment are another significant indicator for fundamental traders. Reports of confidence and sentiment for the UK are essential since traders would like to identify whether the mass of people are positive or pessimistic about the economy. The changes along with the size can be the key to forecast shifting trends and accordingly changes in the British Pound.
4. GDP or Economic Growth
Another key indicator which affects UK currency values is the overall economic activity level in the UK. Just like another country, the main measure is the GDP (Gross Domestic Product). For your information, there are three diverse GDP reports to be monitored including Revised GDP, Preliminary GDP and Final GDP. In addition to GDP, traders need to be aware of retail sales and manufacturing PMI.
5. Balance of Payments
The last but not least, there is BOP or the Balance of Payments. BOP refers to a country’s accounting record in case of its interaction to the rest of the world. While BOP is generated by three accounts, it is only current account which is commonly used by Forex traders
in fundamental analysis. The current account displays how much certain country is importing and exporting.
The Bottom Line
In conclusion, there are a lot of economic indicators which are able to influence the British Pound. Understanding which data reports to use for your advantage is the first step for successful GBP trading. As a trader, you must be able to interpret the reports to create trading direction. Since it is not an easy thing to do, keep learn Forex until you master it.