Economic Indicators are financial and economic reviews regularly published by public and private institutions in a variety of statistical publications, as well as charts and tables of various numerical indicators commonly used by foreign exchange traders for the purpose of monitoring and analyzing economic performance.

It is essential to know the exact time when each economic indicator will be released. Watching the economic calendar not only helps you consider trades around these events, it helps explain otherwise unanticipated price actions during those periods.

Economic indicators are commonly released at different times with the potential of having tremendous volatility, but it takes knowledge and skill of advanced economics to parse the data accurately.

It is important to understand every component of each data release, but you should also grasp key, large-scale relationships between reports and what they measure in the economy and how it can help you as a trader position your trade.

For example, you should know and understand the Gross Domestic Product which measures the overall growth of the economy. If the average GDP growth in the US is 2.5-3% per annum, a growth rate above the average will likely be seen by most investors as a buying opportunity for the US dollar. But for the same reason that the GDP growth is a result of inventory build up, it may actually be a negative effect for the currency. Understanding key economic indicators involves the interpretation of the business life cycle. The business life cycle generally shows the growth of business activity consisting of four stages: expansion, peak, recession, and trough.

The growth of business activity is interpreted as the increase of demand and production, as well as an expansion of employment leading to the rise of interest rates due to money borrowings by businesses and consumers for expansion.

Interest Rate Influences
When the interest rates are raised, investors will want to capitalize on high returns and you will see money flowing into the country. When one country's interest rates rise, their currency is seen as being stronger than the other currencies. This happens because investors seek more of that currency to profit more. Simply put, it is seen as a good thing when interest rates are hiked and an adverse thing when they are cut.

For example, higher interest rates in the United Kingdom may prompt Japanese investors to sell the Japanese yen and buy bonds in British pound. Similarly, if interest rates increase in the United States, those investors may decide to sell their Pound-bonds and move into bonds in US dollar, driving the British pound down and the US dollar up.

Geo-Political Events Influences
When there is geo-political news of macroeconomic proportions such as political instability, coup d'état, earthquakes, or hurricanes in other countries, it drives up the demand for the safety currencies like the US dollar as investors look for a "safe haven" for their capital investments.

Petroleum Prices Influences
When the prices of petroleum-related products such as crude oil and natural gas rise, the currency values of oil-dependent countries such as the United States and Japan weaken as a result of high production costs, consequently leading to inflationary pressures in the economy.

If you believe oil prices will continue to rise, you can consider buying commodity-based currencies such as the Canadian dollar or the Australian dollar or by selling oil-dependent currencies.

Gold Prices Influences
When the prices of precious metals such as gold and silver rise, the value of the US dollar weakens as the currency has an inverse relationship with gold prices. Historically, gold was a safe haven of major currencies back in the 19th century, but in the current Floating Period, the US dollar is known as the safe haven of major currencies.

When the gold price breaks into an important level, currencies of major gold producers such as the Canadian and Australian dollars are expected to rise against the Japanese yen and the British pound.