A good economy means good currency value. A general picture of a countrys economy can be deduced from its GDP because it is a reflection of the countrys economical growth. For example, when dealing with the EUR/USD, the European GDP will help traders determine the growth of the European economy. Otherwise, when dealing with the USD/CHF, you should check up on the Swiss GDP for information on the growth and productivity of the Swiss economy. Similarly, the traders may also take note of the Japanese Industrial Production figures if they are interested in the USD/JPY.

Besides the GDP, there are other publications which provide the traders with invaluable insights of each major economy. The Swiss Institute for Business Cycle Research (KOF) conducts surveys from various industries, the retail and wholesale sectors and they use the data collected to predict the growth of their GDP for the coming 8 months. Such predictions might just help the traders to plan his future strategies in dealing with the Swissy. In Japan, the Tankan Survey is released quarterly each year and reports on the ratio of optimistic businesses versus pessimistic business. When dealing with the Euro, the trader cannot afford to overlook Germany because it is the Europes largest economy. Therefore, pay attention to the Germanys IFO Business Climate Survey which also provides detailed reports and analysis on topics ranging from exchange rates to economic forecasts to social policies.

All four major currencies involve the US dollar and so it is only natural that a trader should pay attention to the US. Besides its GDP, watch out for reports on the US current account and the US trade balance. The US current account has been on the deficit for some time but a prolonged deficit is not necessarily a sign of a weak economy or depreciation in the value of the dollar. By monitoring the state of the US current account, the trader will be provided with merely an approximation of the US comparative advantage or disadvantage in the global economy which might influence the market. Similarly, a trade deficit does not necessarily reflect a bad economy. In fact, the trade deficit in the US has resulted in a fairly strong dollar compared to other currencies. Still, for economies which depend largely on export such as Japan, it is important that their exports exceed imports especially when China is beginning to be very competitive. Also for European countries, an excess of imports might just weaken the currency.

But a good economy also needs to be supported by a healthy employment rate in the country. For the US market, the trader can safely gauge the condition of the market by referring to the US Non Farm Payrolls which show the number of workers in various industries in the US, excluding employees working with the general government, private households, nonprofit organizations and farms. The market has become sensitive to these monthly reports due to the rumored possibility of a jobless recovery. Although the economy seems to be picking up, a slow employment growth seems to indicate a fragile economy which will have its impact on the market. Meanwhile, watch out for the UK unemployment figures when trading the GBP/USD and the Germans unemployment figures when trading EUR/USD. Again, the focus is on Germany because being Europes largest economy, its unemployment situation can be used as a representative of Europes current economic condition. At the same time, the US TIC data allows the trader to keep track of the total US securities being bought by foreign entities and also the exactly how much money it gets to finance itself. A decreasing TIC inflow may indicate that the fall of the dollar value. Nevertheless, consumer spending is also an important factor to pay attention to. Healthy spending is good news for the US because it will then reaffirm the dollar. This is the same for Japan. While the Japanese economy is driven primarily by its export sector, consumer spending is an important gauge of economic activity and prosperity.

Next, interest rates affect currency value as well as the carry trade, with the US dollar, yen, British pound and Swiss franc reportedly being the main funding currencies. Due to the high leverage involved in carry trade transactions, even slight changes in interest rates which influence exchange rates may cause deep losses. But what may cause banks to up or slash interest rates?

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