The fundamental side of the market


In general, the value of money is important as a goal of economic policy in conjunction with the nominal GDP (the level of inflation in this case is considered to be predictable and stable.) The effects of money growth on prices and output depends on the velocity of money.

For economists, money supply still remains an important macroeconomic environment, the sharp increase which could lead to a jump in inflation, and hence, to increase interest rates and falling stock prices.

This index is published on the last working Friday of each month.

Treasury Budget (Budget of the Treasury) - is the balance of the treasury budget. It is an indicator of the difference of costs and revenues of the government. This is purely a macroeconomic indicator used for long-term forecasts. Its value can have a large impact on the market for government obligations, especially in the event of discrepancies in the numbers. For example, if government revenues due to the stability of the economic situation are higher than planned, it can be interpreted as the emergence of the possibility of reducing government borrowing in the market, and (or) reduce rates of interest. The highest value for the markets figure budget balance gets in April, when it is possible to determine the tax revenue to the Treasury for the first quarter, and forecast their annual volume.

Treasury balance published on Monday in the fourth week of each month.

Official interest rates (BASE rate, FED FUNDS rate, Discount rate, Overnight rate).

Great impact in the market of the Fed's actions. It is therefore great attention to the changes in interest rates, operations FOMC (Federal Open Market Committee) on the government securities market and just to the representatives of the Fed (eg, Greenspan). FOMC meeting held eight times a year (once every six weeks, usually on Tuesdays). Considered at a meeting of the economic situation in the country, and based on the analysis, the direction of future monetary policy by policy, and may be determined by the following indicators:

- The level of credit interest rate sale of federal funds Federal Funds Rate (only the target level, the bet can vary from a few tenths to two percent);

- The value of the Discount Interest Rate - Discount Rate (to a first approximation analog of the refinancing rate).

The final minutes of the meeting (Minutes of the Federal Open Market Committee) published a few days after the next. The decision to change rates can be made between the announced dates of meetings. At higher rates in the short-term speculative capital inflows seen since you can invest a greater percentage, it strengthens the currency. For example, raising the BOE June 4, 1998 BASE RATE from 7.25% to 7.5% has created a movement at the rate of GBPUSD over 100 points in less than a quarter of an hour, and if it were not followed by a comment that this increase - the last in this series, the movement would go on.

The meeting of the Monetary Committee of the Central Bank announced in the economic calendar.

In addition to these macroeconomic indicators, we can also note the following

PMI - PMI for the manufacturing sector in Germany, England, Italy, etc.

IFO - Business Climate Index of the German Institute for Economic Research;

CBI - Confederation of British record producer;

BRC - Sales review of the British Confederation of Industrialists.

Planned news can cause three options market reaction:

- When the expectations of market participants fully justified, and the dynamics of movement does not undergo special changes;

- When the expectations of not only met, but are completely wrong, and we should expect a change in the opposite direction, before reversing the market is sometimes understanding between the news;

- When, due to underestimation of the importance of influence news on the economy is enhanced driving dynamics in the original direction.

Summarizing, we can say that all the fundamental factors must be assessed from two points of view as news (LED) will affect the decision of the monetary committee of the central bank, and how it will affect the whole economic situation in the whole country.

Information is not always relevant, because or a minor change, or it is already taken into account by the market, and the only light was a measure of the general background. It makes sense to try to make sense of any changes to the views of other market participants. The only way to get a sense of the so-called market (market sentiment), which is a vital element in the analysis and prediction. In modern conditions, access to information, its processing - is warmhearted and speed the process, and the trader must itself be able to decide which data is important to recognize how to interpret them, and what value they give. And do it quickly.