Forex Fundamentals

Learn Forex Fundamentals

Learn forex fundamentals from the releases, central banks and futures positioning that move currencies. Each guide explains what a figure measures, when it comes out and how to read it.

Every guide is written by Rutger Lokin.

Forex economic indicators

  • What Is NFP (Non-Farm Payrolls)?

    What is NFP? Non-Farm Payrolls is the monthly change in US payroll jobs, published by the BLS at 8:30 a.m. Eastern Time and watched closely by forex traders.

  • What Is CPI (Consumer Price Index)?

    What is CPI? The Consumer Price Index tracks the prices US households pay, and forex traders read it against the forecast the second it is published.

  • What Is PCE (Personal Consumption Expenditures)?

    What is PCE? The Personal Consumption Expenditures price index measures US consumer prices, and the Federal Reserve sets its 2% inflation goal on it.

  • What Is PMI (Purchasing Managers’ Index)?

    What is PMI? The Purchasing Managers’ Index is a monthly business survey: above 50 means a sector grew, below 50 it shrank. How to read it in forex.

  • What Is GDP (Gross Domestic Product)?

    What is GDP? Gross Domestic Product is the value of the final goods and services an economy produces. How the US figure is published and how forex reads it.

  • What Is Core Inflation?

    What is core inflation? Inflation without food and energy prices, which swing the most. Central banks watch it to judge the trend, and so do currency traders.

  • How to Trade CPI Inflation in Forex

    How to trade CPI inflation in forex: read the report against its forecast, check core and the monthly change, and follow the expected path of interest rates.

  • NFP Trading Guide: How Non-Farm Payrolls Move the Dollar

    NFP trading guide: why the jobs report moves the dollar, why the surprise against the forecast counts, and why wages and revisions can outweigh the headline.

  • What Is Retail Sales?

    What is retail sales? The monthly measure of consumer spending at shops, car dealers, petrol stations, restaurants and online stores, and how it moves FX.

Central banks in forex

  • What Is Hawkish and Dovish in Forex?

    What is hawkish and dovish? Hawkish: a central bank leans toward higher rates to fight inflation. Dovish: it leans toward lower rates to support growth.

  • What Is the Terminal Rate?

    What is the terminal rate? The peak rate markets expect a central bank to reach in this cycle, priced in futures and swaps, and why it moves currencies.

  • The Fed Dot Plot Explained

    Dot plot explained: how each Fed policymaker marks the rate path, how to read the median and longer-run dots, and why the gap with pricing moves the dollar.

Currency fundamentals

  • What Is a Fundamental Bias?

    What is a fundamental bias? The side a currency’s economy pulls it toward, from Strong Bullish to Strong Bearish, and how to read it before you trade a pair.

Fundamental forex strategy

FX mechanics

  • What Is Base and Quote Currency?

    What is base and quote currency? The first and second currency of a pair: the price is how much of the quote one unit of the base costs, and how to read it.

  • What Is an Interest Rate Differential?

    What is an interest rate differential? The gap between the rates of a pair’s two currencies: how to work it out on real 2024 rates, and how it becomes swap.

  • Anatomy of a Rate Differential

    Anatomy of a rate differential: why the expected gap moves a pair more than today’s, how inflation makes a nominal gap real, and when the gap gives way.

  • Currency Pairs and Relative Pricing

    Currency pairs and relative pricing: a pair is one currency priced in another, so every move has two sides. How to tell which side moved and how crosses work.

Currencies

  • Australian Dollar Fundamentals (AUD)

    Australian dollar fundamentals: how China and iron ore, global risk appetite and the Reserve Bank of Australia’s rate path move the Aussie.

  • New Zealand Dollar Fundamentals (NZD)

    New Zealand dollar fundamentals: how dairy prices, China, global risk appetite and the Reserve Bank of New Zealand move the Kiwi in a thin market.

  • Japanese Yen Fundamentals (JPY)

    Japanese yen fundamentals: how the US-Japan yield gap, the Bank of Japan, risk appetite and intervention by Japan’s Ministry of Finance move the yen.

  • US Dollar Fundamentals (USD)

    US dollar fundamentals: how the Federal Reserve’s expected rate path, US data, the safe-haven role and positioning move the world’s reserve currency.

  • Canadian Dollar Fundamentals (CAD)

    Canadian dollar fundamentals: how oil, the US economy and trade policy, and the gap between the Bank of Canada and the Fed move the loonie.

  • British Pound Fundamentals (GBP)

    British pound fundamentals: how Bank of England rate expectations, UK inflation and trust in UK public finances move sterling, as September 2022 showed.

  • Euro Fundamentals (EUR)

    Euro fundamentals: how the gap between the ECB and the Fed, energy prices and stress in euro area bond markets move the euro, the market’s anti-dollar.

  • Swiss Franc Fundamentals (CHF)

    Swiss franc fundamentals: why the franc rises in a panic, how the Swiss National Bank leans against its strength, and what the end of the 1.20 floor taught.

  • What Is a Commodity Currency?

    What is a commodity currency? One whose country earns so much from raw materials that their price shows in its exchange rate, like AUD, CAD, NZD and NOK.

  • What Is a Funding Currency?

    What is a funding currency? The cheap currency traders borrow or sell to fund a carry trade, like the yen and the franc, and why it jumps when markets panic.

  • What Is a Safe Haven Currency?

    What is a safe haven currency? One investors buy when they are scared, classically the yen, the Swiss franc and the US dollar, and why each rises in a panic.

COT positioning