The Federal Open Market Committee (FOMC) is the branch of the Federal Reserve Board that determines the direction of monetary policy. The FOMC is composed of the board of governors, which has seven members, and five Reserve Bank presidents. The president of the Federal Reserve Bank of New York serves continuously, while the presidents of the other Reserve Banks rotate their service of one-year terms. The FOMC Committee meets eight times a year usually intervals forty days.
The Federal Open Market Committee (FOMC) Meeting Minutes are a detailed record of the committee’s policy-setting meeting held about two weeks earlier. The minutes offer detailed insights regarding the FOMC’s stance on monetary policy, so currency traders carefully examine them for clues regarding the outcome of future interest rate decisions.
Commonly known as the Beige Book, this report is published eight times per year. Each Federal Reserve Bank gathers anecdotal information on current economic conditions in its District through reports from Bank and Branch directors and interviews with key business contacts, economists, market experts, and other sources. The Beige Book summarizes this information by District and sector. An overall summary of the twelve district reports is prepared by a designated Federal Reserve Bank on a rotating basis.
The Unemployment Rate measures the percentage of the total work force that is unemployed and actively seeking employment during the previous month.
JOLT’s is a survey by the US Bureau of Labor Statistics BLS to help measure available job vacancies. It collects data from employers about their businesses’ employment, job openings, recruitment, hires and separations. A JOLT defines Job Openings as all positions that are open (not filled) on the last business day of the month. A job is “open” only if it meets all three of the following conditions: 1. a specific position exists and there is work available for that position. 2. The job could start within 30 days, whether or not the establishment finds a suitable candidate during that time. 3. There is active recruiting for workers from outside the establishment location that has the opening. A reading that is stronger than forecast is generally supportive (bullish) for the USD, while a weaker than forecast reading is generally negative (bearish) for the USD.
ISM Manufacturing assesses the state of US industry by surveying executives on expectations for future production, new orders, inventories, employment and deliveries. Though manufacturing accounts for a relatively small portion of GDP, fluctuations in manufacturing tend to bear the most responsibility for changes in GDP. Consequently, developments in manufacturing often front run trends in the overall economy, making the ISM manufacturing figure a leading indicator of economic turnarounds. A pickup in demand for manufactured products after a period of recession, reflected by a higher ISM figure, strongly suggests a reversal upward. Conversely a slowdown in manufacturing orders and production during a boom suggests a slowing of the economy. The ISM Manufacturing Survey is valued for its timeliness, and indeed, during waning boom cycle’s analyst point out that ISM tends to be one of the biggest market moving economic releases. The reasoning lies within the ISM’s Prices Paid and Employment subcomponents. These components reflect sentiment towards inflation and labor conditions – two of the market’s most significant health indicators. Given that the ISM’s timeliness, the information gleaned from such components proceeds other market data (like Non-Farm Payrolls or CPI), making the ISM a significant indicator. Values over 50 generally indicate an expansion, while values below 50 indicate contraction.
The U.S ISM Non-Manufacturing gauges the business conditions in non-manufacturing industries, based on measures of employment trends, prices and new orders. Though non-manufacturing sectors make up the majority of the economy, the ISM Non-Manufacturing has less market impact because non-manufacturing data tends to be more cyclical and predictable. However, these sectors do account for a considerable portion of CPI. As a result, the figure gives insight into conditions which can impact output growth and inflationary pressures.
The ISM Non-Manufacturing Index is based on a sample survey of purchasing and supply executives, weighted according to industry contribution to GDP. The Index is calculated using 50% as the centerline between positive and negative expectations; the figure is reported in headlines as the percent change. Values over 50 generally indicate an expansion, while values below 50 indicate contraction.
The GDP for the United States is a gauge of the overall output (goods & services) of the U.S. economy on the continental US GDP is the most comprehensive overall measure of economic output and provides key insight as to the driving forces of the economy. If the figure increases, then the economy is improving, and thus the dollar tends to strengthen. If the number falls short of expectations or meets the consensus, dollar bearishness may be triggered. This sort of reaction is again tied to interest rates, as traders expect an accelerating economy, consumers will be affected by inflation and consequently interest rates will rise. However, much like the CPI, a negative change in GDP is more difficult to trade; just because the pace of growth has slowed does not mean it has deteriorated. On the other hand, a better than expected number will usually result in the dollar rising as it implicates that a quickly expanding economy will sooner or later require higher interest rates to keep inflation in check..
GDP = C + I + G + (EX – IM)
C = private consumption
I = private investment
G = government expenditure
EX = exports of goods and services
IM = imports of goods and services
The figure is commonly reported in headlines as an annualized percentage, based on quarterly data. On a technical note: The GDP can be reported in either real or nominal terms, real GDP being adjusted for inflation. The GDP has three releases, as an Advanced, Preliminary, and Final figure. The Advanced figure is released four weeks following the quarter’s end. One month later, the Preliminary GDP is released, followed by the Final GDP measure at the end of the quarter following the reporting quarter. As the important timely measure, the Advanced GDP tends to move markets the most.
Released with the GDP, the GDP Price Index measures the change in the prices of goods and services that are included in US GDP. The GDP Price Index is an indicator for inflation calculated by comparing the current GDP to GDP in the reference year. A high or rising GDP Price Index, like other indicators of inflation, puts pressure on the Federal Reserve to raise interest rates. These rate hikes generally strengthen the dollar, as they increase the return for many dollar-denominated securities. The GDP price index differs from other more popular inflation measures, like CPI or PCE Deflator, in that it includes all products accounted for by GDP and does not include the effects of changes in import prices. Furthermore, the report is only released quarterly and commands little market attention because of it lack of timeliness.
The headline figure is the annualized percentage change.
The Energy Information Administration’s (EIA) Crude Oil Inventories measures the weekly change in the number of barrels of commercial crude oil held by US firms. The level of inventories influences the price of petroleum products. If the increase in crude inventories is more than expected, it implies weaker demand and is bearish for crude prices. The same can be said if a decline in inventories is less than expected.
The American Petroleum Institute reports inventory levels of US crude oil, gasoline and distillates stocks. The figure shows how much oil and product is available in storage. The indicator gives an overview of US petroleum demand.
The Baker Hughes rig count is an important business barometer for the oil drilling industry. When drilling rigs are active they consume products and services produced by the oil service industry. The active rig count acts as a leading indicator of demand for oil products. This report is published every Friday in the afternoon EST.
The monthly number of domestically produced units of cars, SUVs, mini-vans and light trucks that are sold in the U.S. Motor vehicle sales are an economic indicator that records the reported sales by individual manufacturers on the first business day of every month.
The balance of trade (BOT) is the difference between a country’s imports and its exports for a given time period. The balance of trade is the largest component of the country’s balance of payments (BOP). The balance of trade is also referred to as the trade balance or the international trade balance.
The Philadelphia Federal Reserve Manufacturing Index rates the relative level of general business conditions in Philadelphia. A level above zero on the index indicates improving conditions; below indicates worsening conditions. The data is compiled from a survey of about 250 manufacturers in the Philadelphia Federal Reserve district.
The Michigan sentiment index includes two major components, a “current conditions” component and an “expectations” component. The current conditions component index is based on the answers to two standard questions and the expectations component index is based on three standard questions. This number is the expectations part of the overall index. A higher than expected number should be taken more positive to the USD, while a lower than expected number as negative.
The Core Consumer Price Index (CPI) measures the changes in the price of goods and services, excluding food and energy. The CPI measures price change from the perspective of the consumer. It is a key way to measure changes in purchasing trends and inflation.
Retail Sales measure the change in the total value of sales at the retail level. It is the foremost indicator of consumer spending, which accounts for the majority of overall economic activity.
Building Permits measures the change in the number of new building permits issued by the government. Building permits are a key indicator of demand in the housing market.
U.S Housing Starts measures the change in the number of new constructions underway. The construction industry is one of the first to go into a recession when the economy declines but also to recover as conditions improve. A higher than expected number could be taken as positive for the USD and a lower number as negative.
Existing Home Sales measures the change in the number of existing (not new) residential buildings that were sold during the previous month. This report helps to gauge the strength of the U.S. housing market and is a key indicator of overall economic strength.
The value of orders placed for relatively long lasting goods. Durable Goods are expected to last more than three years. Such products often require large investments and usually reflect optimism on the part of the buyer that their expenditure will be worthwhile. Because orders for goods have large sway over the actual production, this figure serves as an excellent forecast of U.S. output to come. Durable Goods are typically sensitive to economic changes. When consumers become skeptical about economic conditions, sales of durable goods are one of the first to be impacted since consumers can delay purchases of durable items, like cars and televisions, only spending money on necessities in times of economic hardship. Conversely, when consumer confidence is restored, orders for durable goods rebound quickly. The data is highly volatile as well, some volatility is eliminated with the Durable Goods Orders excluding Transportation figure, making it the more closely watched indicator. The headline figure is expressed as a percentage change from previous months.
The Federal Budget Balance measures the difference in value between the federal government’s income and expenditure during the reported month. A positive number indicates a budget surplus; a negative number indicates a deficit.
Treasury International Capital (TIC) Net Long-Term Transactions measures the difference in value between foreign long-term securities purchased by U.S. citizens and U.S. long-term securities purchased by foreign investors. Demand for domestic securities and currency demand are directly linked U.S dollar foreigners must buy the domestic currency to purchase the nation’s securities.
The Service PMI release is published monthly by Markit Economics. The data are based on surveys of over 400 executives in private sector service companies. The surveys cover transport and communication, financial intermediaries, business and personal services, computing & IT, hotels and restaurants. The information to produce the PMI is gathered using monthly surveys sent to purchasing executives at approximately 300 companies. A PMI of more than 50 represents expansion of the manufacturing sector when compared to the previous month. A PMI reading under 50 represents a contraction, and a reading at 50 indicates no change.