Ameba PRO Strategy -|Trading as Investing|- 3 birds of wisdom

Of course I will keep with posting.
I have long term plans here ,to explain everything simpliest and step by step but obligations always slow down the process.

Next I will write about economic indicators ,so step by step

it is time to start with economic indicators part

We will focus on three main :
Gross Domestic Product GDP (growth)
Consumer Price Index CPI (inflation)
and Employment (Unemployment rate)



Well today we will see a few things about GDP - Gross Domestic Product

In short GDP measures how fast or slow the economy is growing.

For every report it is important to know two different things about this report,we have every month this data and also on quarter (quarterly).
Of course on your economic calendars you have Q/Q and Y/Y or M/M (quarter to quarter ,year to year and month to month).
One quarter have 3 months.
GDP is a good barometer of the ups and downs in the economy.
It is crucial to track progress of GDP.
All goods and services produced in one country,video games,chairs,haircuts,computers,books ... (name anything,whatever you want) that are sold in one country or
exported to other during some specific period,even goods that are not sold but they are in stockroom .. (inventory) are GDP.

GDP shows the final value of all output in the one economy,regardless of whether it was sold or placed in inventory (they are produced!).
If you watch GDP during last few decades (for example USA GDP) it is clear that U.S economy has a natural tend to grow.
Business activiry had been expanging far more years than it has been contracting.
The faster and longer the economy grows ,the higher is the level of employment.
With more people working , total household income goes up and so on .
This encourages people to spend more on goods and services. As consumer spending accelerates, companies will be inclined to speed up their own production and
hire additional workers.
Looking at the GDP report itself, it’s important to note at the outset that the government computes the size of the economy in two ways: one is in nominal dollar terms and the other is in real dollar terms.
Let’s review what is meant by these two concepts.
Current (or nominal dollars) GDP tallies the value of all goods and services produced in the country using present prices.
On the other hand, real (or chained dollars) GDP counts only the value of what was physically produced.

To clarify the point, suppose a hat-making factory announces that it made $1 million selling hats this year, 11% more than last year. The $1 million represents nominal company sales (or current dollars). However, something’s missing. From this figure alone, it’s unclear how they achieved the extra income. Did the factory actually sell 11% more hats? Or did they sell the same number of hats as the year before but simply raised prices by 11%? If the factory made more money because it increased the price tag by 11%, then in real (or constant dollar) terms, the true volume of hats sold this year was no greater than last year, at $900,000. This is an important distinction. It’s vital to know if the economy grew because the quantity of products sold was greater or whether it was largely the result of price hikes, or inflation. What you want to see are real increases in economic output, which means that a greater supply of goods and services is available for consumers. Higher real GDP improves the standard of living of people, while GDP growth due to inflation erodes living standards because people have to pay more for the same amount of products consumed as before. These two measures of GDP are thus of fundamental importance in economics.
(Book example)

Lets look at one GDP report



It is always good to check all that report offers.

Gross Domestic Product: The top line says it all. It’s the final value of all goods and services produced in the country. The word “final” is intentional here.
GDP does not directly include the costs of making a product during the intermediate stages. There’s a logical reason for this: the value of intermediate goods is already included in the final product, so computing them separately would mean counting such costs more than once. For example, the final price of a new car already factors in all the costs of steel and rubber that went into making it. If you were to add the price of steel and rubber and wages at each stage of the assembly process, you would be counting the same production expenses several times.
Thus, the government picks only the final value of goods and services to compute GDP.
There are a few good data here (except raw GDP).

For example PCE (Personal consumption expenditures) measures inflation , Federal Reserves use PCE instead of CPI (Consumer Price Index) to measure inflation.
There is not big difference (divergency ) between those two measures but it is good to know this.
PCE shows what consumers spend .
This is essentially all spending by consumers on goods and services, and it accounts for 70% of total GDP.
Its massive role in the economy, if households are not in a spending mood, it spells serious trouble for the economy, with a recession nearly unavoidable. For this reason, analysts closely monitor the dozen or so monthly economic indicators that report on consumers’ moods, income, and spending.
On this part you see Durable Goods,Nondurable Goods and Services.

Durable goods are include things like cars, household goods (home appliances, consumer electronics, furniture, etc.), sports equipment, firearms, and toys.They are BIG - TICKET things.
It contains 15% of all consumer spending.
I like to pay attention on this one because it is very sensitive area for real spending data.
Because it is closely related with ordinary people living.If people drasticlly stop with buying durable goods it is a really a signal that something is on the way .
When there is no money for things like a television or car , it is quite bad (if you know what i mean
Nondurable goods or soft goods (consumables) are the opposite of durable goods. They may be defined either as goods that are immediately consumed in one use or ones that have a lifespan of less than 3 years.
Examples of nondurable goods include fast moving consumer goods such as cosmetics and cleaning products, food, fuel, beer, cigarettes, medication, office supplies, packaging and containers, paper and paper products, personal products, rubber, plastics, textiles, clothing, and footwear.
Nondurables make up about 30% of all personal spending.
In contrast to the volatility often found in durable goods sales, orders for nondurables grow at a more stable rate during both good and bad economic times.
During uncertain economic times, households might postpone the purchase of a new car, but spending on food and fuel oil cannot be delayed.
Services: more than half of all consumer spending goes to pay for services such as medical and dental care, auto and home insurance, haircuts,mortgages, transportation, and legal costs.
The service sector has grown dramatically, from 40% of all personal expenditures in 1960 to nearly 60% now. This
category, too, is fairly stable because outlays for housing and medical services continue largely unabated even when income declines.
And bear in the mind I talk here about US economy.

Gross private domestic investment shows what businesses invest in plants and equipment ... To be honest I neglect this one.
But my favourite is next - Net exports .
That is the difference between what the citizens sells to foreigners and what citizens buys from them.
IMPORT and EXPORT,that is.
There is no need to explain the role of TRADE for economy.
And this one about government consumption expenditures and gross investment shows how much federal, state, and local governments spend and invest),I also don't pay to much attention at this.
But it is good to know as well ,to have bigger picture.

Huh I wrote here hell of text,because you need to know all about GDP and how to properly interperte this.
Next I will write about how it is compute and so on ..
GDP is one of the most powerful indicators.We will later use a lot this data.
Stay tuned ...

Today we have GDP data from UK,chance to see how it looks like in real time .

http://www.ons.gov.uk/ons/dcp171778_392909.pdf

I'm pretty busy,but I give my best to write as much as I can.

I hope that you read here a usefull things.

I see that there is plently of people that read this thread very often and because of that I'm very glad to keep with writing and do my best to explain this
a little bit complex approach as simpliest as I can.

Now let's see how THEY compute GDP ?
It is logically to ask ,how is it possible to count all that and what is the method for these calculations...are they competent at all.
Well back in 30's ,Bureaue of Economic Analysis (U.S) started with GDP report,so it is one of the oldest and longest-running economic indicators.
And we must respect old things,rights ? It pass time -test and it is proved to be very usefull.

BEA collects and adjust economic data from thousands of governmental and private sources.
There are montly retail sales,hoe purchases among that informations..that kind of informations.
OF course they can't get all data at first ,on first reading of GDP (monthly) ,because of that we have revisions and so on ,but investors and policymakers are mostlynot
willing to wait that long.
Few want to wait a full three months to get the final quarterly GDP report. Thus, the BEA runs the quarterly GDP numbers through its computers three times
for the public. The first GDP report, known as the advance release, is published four weeks after the quarter ends and offers a rough preview of how the economy behaved in
the quarter that just ended. A month later, the preliminary GDP report is announced. It contains some revisions based on information not available at the time of the advance
release. It’s only at the very end of the subsequent quarter that we see a final GDP report with additional changes in the numbers to reflect more complete information.
However, it doesn’t end there. On top of these revisions, the BEA takes another pass at the GDP statistics once a year, usually in July, when it further refines the numbers

I won't get deep into BEA and NIPA measurement,it is important to know just this much.

It’s important to keep in mind that a real 3%–3.5% annual growth rate is considered the pace the economy has to grow for people to get a feeling of prosperity.
For let's say an $11 trillion economy, this means the U.S. must increase its output of goods and services by at least $330 billion every year. If it expands less than 3% onaverage, the economy is not growing fast enough to absorb all the new workers entering the labor force, and the result will usually be higher unemployment.
A high level of productivity growth along with an ample supply of new workers coming into the labor force keeps the economy well-oiled and out of danger of
overheating.

I like to translate this as production is only way to give us opportunity in the future to pay our debts.With various regulations of course.

Someone call me conservative,but I see gdp role on economy that way.
Tomorrow we have GDP data from USA!! Open you eyes wide open! Because last year in this period,we got negative GDP (it won't be this time) but it is very important to watch.

Because it is seasonal pattern

After that ee will go to inflation and talk a little bit about it,then employment.
And after that we will go to news trading ,second part of this system.

GDP impacts financial markets .

On bond market - if the economy is growing at or below the pace projected by economists, the bond market is likely to react positively, especially if real final
sales are anemic and unwanted inventories are ballooning.
Conversely, if GDP growth numbers exceed expectations and the inflation indexes are showing signs of accelerating, it could be a nightmare for bond holders.

On stock market - the equity market’s reaction to the GDP report will likely be less reflexive than the bond market. Here the central question is how does the latest release affect the outlook for corporate profits? A healthy economy generates more business earnings, while a sluggish
business environment depresses sales and income. However, there’s an important qualification here. If economic activity has been racing ahead of the 3.5% rate for several quarters, even shareholders start to get nervous about rising prices. Higher inflation will cause
an erosion in household purchasing power and probably force interest rates higher.

And currency market (U.S Dollar , because we take USA as example ) To foreign investors, a strong American economy is viewed more favorably than a weak
one. Robust economic activity in the U.S. spurs corporate profits and firms up interest rates; thus, foreign investors see opportunities to make money in the stock market and from higher-yielding Treasury bills and bonds. All this will increase the demand for dollars. If the Federal Reserve moves quickly to preempt inflation by driving up short-term rates, odds are it would also lead to an appreciation of the dollar because of the perception that the U.S. central bank is ahead of the curve in containing price pressures.
However, if inflation accelerates and stays at a high level, it would lower U.S. competitiveness in the world and worsen the country’s foreign trade deficit, a scenario that
can make U.S. currency far less appealing.

Salute cheers.

For 20 minutes GDP data for USA.Focus on data and PCE inflation as well.

GDP data for USA down from 5% to 2.6% .

After bad durable goods it was highly expected to see lower numbers.
From other side Canadian GDP for this month is the negative territory -0.2%.
And CAD is as well smashed ,sold heavily.

nice Nikolay good anlayises but you meanz go up or down EUR i thing buy go EUR

I'm trying here to explain my whole trading system.
It is complex and it will takes some time to do so...
All this is part of "long term macro trading" (and we are on just about 10-15% of that part) ..still far away from trading.
Read the thread and by the time we will come to trading.


All traders that wants to use this system (approach) must to know a lot of economics.
Read and don't be lazy.

Trading is long term job,invest your time.

P.S I would be crazy thankful to have all this on one place,served served on a plate ,5 years backwards,when I started with trading.

Next thing I will write about employment ,unemployment.

This week we have (un)employment data ,so again real-time opportunity.

Stay tuned

(UN)EMPLOYMENT

You all know why we need lower unemployment rate and highest employment rate.
People need work (money) , need income ,returns for living .. so that is totally clear.
Impact of employment is crucal for economy,because it provides growth and increase living standard of people.
This week as I mention we have Non - Farm payroll (USA) so I will be focused on that.
On economic calendars you should track unemployment rate and that data will be one of the most tracked for our trading (GDP +Unemployment+Inflation (CPI)).
I can't find better way to start this but to write here Bernard Baumohl text about NFP and how data strikes media.

This very excellent description of NFP would paint a great picture of NFP to you.
Read all text.
I cut it a little bit but it is pure gold.

Shortly after dawn on most weekday mornings, a strange ritual takes place in Washington D.C. Two dozen select men and women leave their homes, grab their newspapers, and rush off to spend part of the day under virtual house arrest. Yes, house arrest—as in incarceration. Precisely where they go to be confined can vary day to day. It could be in a dilapidated government building one morning and a high-tech office complex the next.Regardless of the location, what occurs in all these places is always the same. They enter a strict, prison-like setting where contact with the outside world is cut off.One Friday morning, this same group climbs a long set of steps to the side entrance of a sleek, white-stone building on 3rd Avenue and C Street in the heart of the nation’s capital. Armed guards greet them at the entrance for a security check; from this point on,
everyone has to wear their ID tags at all times. The visitors proceed across a lobby, down a quiet narrow corridor, eventually stopping in front of a locked, heavy wooden door. A government official awaits them and quickly opens the door to reveal a drab, windowless,L-shaped room 40 feet long and some 10 feet across. It is empty except for two dozen plain-looking orange and chrome chairs, each resting alongside a row of narrow cubicle like desks. A digital clock that rests high on the wall breaks time down to seconds. It is 7:30:15 a.m., and already 12 people have found their way into the “lock-up” room. More are expected within the next 15 minutes. All who enter dutifully sign their names on a special sheet. Despite its austere appearance, there is an atmosphere of calm in the room, at least for now. Some visitors talk excitedly about the previous night’s televised basketball game. Others are either chatting on cell phones or checking their Palm Pilots for messages. A few keep to themselves by catching up on the morning paper or downing a quick muffin and coffee. Everyone in the room, however, makes a point of always knowing the time, with some people eyeing the digital clock so frequently that their actions may be mistaken for nervous tics.
As the time approaches 8 a.m., there is a palpable change in mood. Gone now are the sounds of light conversation; these sounds are replaced by the din of laptops firing up. Everyone appears to be focused on what is about to occur.
At 7:55 a.m. sharp, a government official walks in and picks up a wall phone to call the Naval Observatory, home to the Vice President of the United States. It is also the location of the ultra-accurate atomic clock. She listens intently for a few seconds and the abruptly hangs up without saying a word. The individual then inserts a key into a lock on the wall, which allows her to adjust the digital clock to the precise second. With the correct time now set, the official then turns around to make a terse announcement.
“Please turn off all cell phones and Palm Pilots, and disconnect laptops from your telephone lines.”
To make sure everyone complies, the official walks across the room and eyes each desk. Meanwhile a second federal employee arrives carrying copies of a highly sensitive government report. Each one is placed facedown on an empty desk. Then it begins.At precisely 8 a.m., the door to the lock-up room clicks shut. From this point on, all those inside are out of touch with the rest of the world. No one is permitted to leave. No calls or messages can come into or out of the room. Security is tight. A guard stands by outside, ready to use force if anyone attempts to sneak out. What secret is the government protecting? Is the CIA about to begin a classified briefing on intelligence activities? Are Congressional investigators huddling to hear the newest terrorist threat? No. All these precautions are taken for one reason. The government is about to release numbers. Statistics. More precisely, economic statistics. The visitors in theroom are business reporters representing news organizations from around the world, and this morning they’re working out of the Department of Labor’s secure press room.
Why such tight secrecy? Because in the next few seconds, these journalists will be the first to lay their eyes on one of the country’s most sensitive economic measures—the monthly report on employment conditions. It can shed fresh light on whether the U.S.economy is growing or facing a slowdown. Did the number of Americans who have jobs rise or fall in the latest month? Have hourly wages gone up or did they drop? Did people work more hours or less? These statistics might not seem particularly earthshaking to most Americans, but they can and do whip the global stock, bond, and currency markets into a frenzy. For individual investors and professional money managers, the information in the jobs report can mean the difference between having a winning or losing portfolio. It also explains the need for the security measures. Individuals getting such hot figures ahead of time can make a quick bundle of money because they know something of which no one else in the financial markets is yet aware. To prevent such abuses, the government guards these and dozens of other key economic indicators as tightly as a military base. It also implements a carefully controlled procedure to disseminate sensitive economic news.
8:00:00 The instant the door is shut, reporters dive in to grab the latest release on employment conditions, which up to now had been facedown. They have just 30 minute to read, digest, and write their stories on how the job market changed during the previous month. Most of the journalists arrived that morning with the expectation that the employment release would carry dismal economic news, with the number of people with out jobs rising—a troubling sign the economy was weakening. At least that was the opinion of most professional forecasters whom these reporters consulted just days earlier.But on this particular morning, the employment report stuns everyone. Those in the lock-up room read with amazement that companies actually hired workers in far greater numbers than anyone expected. Moreover, other figures inside the report appear to corrob
orate signs the economy is doing quite well. Wages are rising and factory overtime is increasing. Far from slowing, the latest evidence indicates the economy is actually picking up steam. It is astounding news of which the rest of the world is yet unaware. As the digital clock continues its silent countdown, reporters working on the story suddenly face some urgent questions. What’s really happening in the economy? Why were so many “experts” caught off guard? What does this mean for future inflation and interest rates? How might the stock, bond, and currency markets react to the news? Though the latest jobs report was unexpected, these journalists are not completely unprepared. As is their routine, a day or two earlier they showered private economists with questions that covered a variety of hypothetical employment scenarios. What does it
mean if the job market worsens? What if it actually improves? Now the reporters are frantically searching through their interview notes to help them file their stories. 8:28:00 A Labor Department worker in the lock-up room notifies television reporters that they can now leave under escort to prepare for their live 8:30 broadcast of the jobs report. For the remaining journalists in the room, there is just a brief warning: “Two minutes left!” By now, most have pieced together their initial version of the story—the headline, the opening sentences, key numbers, and the implications for the economy. All that’s left are some last-minute fact checking and a word tweak here and there. 8:29:00 “One minute. You can open your telephone lines—BUT DO NOT TRANSMIT!” The level of tension isnt just high in the lock-up room, for at that moment, money managers and traders in New York, Chicago, Tokyo, Hong Kong, London, Paris, and Frankfurt are riveted to their computer screens, anxiously waiting for the release of the crucial jobs report. It’s a stomach-churning time for them because investment decisions that involve hundreds of billions of dollars will be made the instant the latest employment news flashes across their monitors. Why such worldwide interest in how jobs fare in America? For one, many foreign investors own U.S. stocks and bonds, and their values can rise or fall based on what the job report says. Second, the international economy is
now so tightly interconnected that a weak or strong jobs report in the U.S. can directly impact business activity in other countries. If joblessness in America climbs, consumers will likely purchase fewer cars from Germany, wine from France, and clothing from Indonesia. In contrast, a jump in employment means households will have more income to spend on imports, and this can stimulate foreign economies.
8:29:30 “Thirty seconds!” The fingers of reporters hover over their computer’s Send button, ready to dispatch the latest employment news to the world. On-air report are also prepared to deliver the news live.
8:29:50 An official counts the final seconds out loud.
“Ten . . . nine . . . eight . . . seven . . . six . . . five . . . four . . . three . . . two . . . on 8:30:00 “Transmit!” Reporters simultaneously hit the Send buttons on their key
boards. In seconds, electronic news carriers, including Bloomberg, AP, Reuters, and Japan’s Kyodo News, release their stories. Television and cable news stations, such as
CNBC, Bloomberg TV, CNN, and MSNBC broadcast the report live. A second or two later, computer screens around the globe carry the first surprising words: “Jobs unexpedly rose the previous month, with the unemployment rate falling instead of rising!”
y rose the previous month, with the unemployment rate falling instead of rising!”
For journalists in the lock-up room, the stress-filled half-hour grind is over, and they are now free to leave. But the work has just begun for those in the investment community.


More to come ....

Well well , tomorrow employment data.,let's write a "few things".
As you can probably know,every first week of the month we have employment data (non farm payrolls + unemployment rate , average earnings,participation rate and so on ).

It usually at Friday,exception is only during some holidays.
Market is very volatile during these reports ,because it affects financial markets a lot.

To not mention again why it is important I will tell that it is important because of people .
Most people just take a look at numbers and don't get into what one report offer and because of that they are half informed about real economic state.
It is not important just to see overall number,it is important to see what report offers.
As for GDP it is same for this data.

Because overall number effects market 5 minutes or so but rest (real data) affects market 30 minutes and rest of the trading hours till market closes.
Unemployment data are very volatile because it is hard to predict their trends and movement most the time.
Unemployment rate shows the precentage of the civilian workforce that is unemployed.
Civilian worce is anyone with 16 years or older who is classified as employed or unemployed (excluding the population .. like miliatary ,prisons ,mental hospitals .. and alike).

How we come to this data, how they are computed?

There are two ways ,two different sources.
One is household survey ,when government calls by telephone and mail inverviews of households.
Second is so called ESTABLISHMENT (or payroll) survey,here companies directly queried about recent changes in staffing.
When we merge those two surveys,we have some picture of labor market and state of the economy health , MOSTLY!

Example of one employment data -> http://www.bls.gov/news.release/arch...t_01092015.pdf

It is large to take a screenshots ,so take a look at this pdf file.
It is not maybe important to write details about those two surveys,but let's write "A FEW" details.

For household survey for example government contacts some 50.000 / 60.000 homes,a population that includes farm as well as non-farm workers,self-employed,domestic helpers ,and even those country (U.S) residents who commute to jobs in Mexico or Canada.
(Because those Americans are close to American borders and spend part of their income in U.S)
About 95% from this survey give respond to government,which is good.
When we divde the number of those over the age of 16 who are not working by the total number of people in the cevilian labor force ,we have unemployment rate.
Easy to calculate
It is not hard to calculate this but labor force contains a lot of confusions.
For example : Any jobless person who is so discouraged by the poor employment prospects that he or she is not actively seeking employment is excluded from the labor force count and thus is not reflected in the main unemployment rate.
So it is a little bit harder ..
Employment report have that unemployment rate that includes even those discouraged workers,but this little - known figured is depp in the 25 page release.
The data in the household survey can be quite valuable to anyone doing research on demographics and marketing. It breaks down the population of those who have jobs—and those who do not—by age, sex, ethnicity, educational achievement, and marital status.

Establishment Survey

Well this ,often reffered to as the PAYROLL survey is by many considered the better measure than household survey,because informations comes directly from business about their job market,not households.
Another thing is in the number.
BLS is in the contact with over 400.000 companies and government agencies.
The government collect those data both from mail and telephone,and it is collected at the same time as household survey ,mid-month schedule.
Repospond is worse than in the Household csurvey case ,about 60% to 70%,because small businesses hiring and firing workers very fast at usual,and they late with their replies.
But when most of them reply ,than that 60%-70% comes to fairly 80% and after revision it is now a good indicator.
The establishment survey includes all persons on the payroll of non-farm businesses,non-profit groups, and local, state, and federal government offices. Even residents of Mexico and Canada who travel to their jobs in the U.S. are counted. That last group might strike some as bizarre. Remember, however, that all the establishment survey does is tally the number of jobs created or lost in the U.S. business and government sectors, regardless of who filled those posts. The only groups excluded from the establishment
survey are farm workers, the self-employed, and domestic help.

What makes the establishment survey such a favorite among economists and investors is that it contains a veritable gold mine of data on the latest changes in employment and income, information that can reveal much about how well the U.S. economic machine is working. To give you a sense of the richness of the data in the payroll numbers, the government looks at more than 500 different industries. Among the most important statistics from the report is the net number of new jobs formed or lost in the latest month. How long did the average workweek last?
How much overtime was generated? What were the average hourly and weekly earnings in the month, and how do they compare to earlier periods?

An interesting question arises at this point. Because the household and establishment surveys are based on two different sources, to what extent do they agree with what’s happening in the employment market? It should come as no surprise that they occasionally tell conflicting stories. For instance, if the unemployment rate, a figure derived from the household survey, drops one month, it gives the impression that the economy is improving and that more people are finding jobs. Yet the establishment survey may simultaneously report that tens of thousands of jobs were actually lost that month.

Why do the two measures occasionally diverge? The reason is they each probe the job market from different perspectives. The household survey collects data on working-age individuals, while the establishment survey doesn’t bother with age. It merely asks companies if they hired new workers. Second, the two surveys have separate guidelines. The household poll includes both farm and non-farm workers, the self-employed, and domestic
help. In contrast, the establishment survey covers a narrower population segment by looking only at non-farm workers in the economy; it excludes the others.
Another key difference between the two surveys is that the establishment report makes no distinction between full and part time work. Remember, its main focus is to report how many jobs were created. If one individual has two part-time jobs, the household survey counts that as one employee, but the establishment survey considers it two jobs. Thus, if 100 new positions were created according to the establishment survey, it
doesn’t necessarily mean 100 people found new employment. One individual could be holding multiple part-time jobs. Thus, it is easy to see why the two reports might conflict.
However, that doesn’t undermine their validity. Each survey has important information about the economy that the other lacks. In any event, over the long run, both the household and establishment numbers do move in tandem.
ENOUGH!

Employment data have big impact on markets.
Let's say if we have unexpectedly good job data ,bond market is affected because that accelerate inflation and rising interest rates.
Thus people sell-off fixed income securities hwn job creation is surging . How far bond prices will fall and how much yields will rise
depends on many factors, but the most important is where the economy happens to be in the business cycle. If the U.S. has just managed to climb out of recession, a jump in employment will likely have only a modest effect on bond prices because there’s no
immediate danger of inflation.
However, if employment accelerates when the economy is already operating at or near peak capacity, prepare to see a steep drop in bond prices and
sharply higher interest rates.
In contrast, a series of weak employment reports reflects a more sluggish economy, which is bullish for bond prices and means interest rates will head lower.
Stocks are positively effected by positive job data,because employees are future good consumers and they will spend more money.
nothing special here ,impact is obvious.
And for currency that is a big impact,you know at the end how big volatility is during the NFP.
As we said for bonds that higher employment rise perspective for higher interest rates, same happends here ,higher interest rates drives the currency up,and the currency become more attractive to foreign investors.
And vice versa.
For two hours NFP,watch carefully that numbers and read whole that DATA!
First 5 minutes inital impact (from numbers) ,other 30 minutes or rest (complete data).

I m watching those two charts,because we have at the same time Canadian job report as well.



We are far away from trading, but take a look at this charts.

USD/JPY and CAD/JPY..USD/JPY good consolidation,squeezed,just what I want to see at this moment,ready for breakout. And CAD/JPY a little bit loosely.
Watching

Wages pick up to 0.5%.
Really good news.

That is the level not seen since 2011 .

A little bit later next chapter - INFLATION!

Stay tuned ..

We talked about GDP and employment data.
And if you were active with reading you could as well test the impact ,real-time impact on markets.
You could see how they are imporatant for markets,especially when we have big surprises.
From both ,trading and economic sides.

I mention earlier as well inflation and that central banks mostly want CLOSE TO NEAR 2% target.
For inflation we will monitor famous CPI,Consumer Price Index.
But before start with CPI itself and how that indicator is calcualted and so on .. let's see what inflation is ,at all.
OF course we will take care here about inflation in economic terms.

You heard about inflation ,it is really one of the most used term ,and probably most hardest learned lesson for both economist and ordinary people.
Definition says: inflation is a sustained increase in the general price level of goods and services in an economy over a period of time.
If you back about 60-70 years back you could see that you could buy one hose for let say 5000$ ,which is today pretty small amount for one house.
10 cents for bread and so on .
To explain a change in the prices during the period of that 60-70 you will need inflation data.
A lot of countries had a really big issues with inflation ,during 70's it was PUBLIC ENEMY number one in USA.
Japan still feels that fear ..

Why the inflation is so tricky and mean ?
Well as inflation rises,every dollae you own buys a smaller percentage of a good or service.
The value of a dollar doesn't stay constant,when there is inflation . ( I said that we would use U.S as example,but this is true for all countries and their economies and currencies).
The value of a dollar is observed in terms of purchasing power,which is the real,tangible goods that money can buy.
When inflation goes up,there is decline in the purchasing power of money .
Means,with the same money we could buy a fewer things.
For example if inflation rates is 2% annually,then theoretically a 1$ of gum will cost 1.02% in a year.
After inflation,your dollar can't buy the same goods it could before.
Here I need to mention a few vatiations of inflation:
DEFLATION - is when the general level of prices is falling,this is opposite of inflation.
In theory levels below 0%,drives to deflationary spirals ,which leads to stagnation and recession.
Hyperinflation - is usually rapid inflation.In extreme cases,this can lead to the breakdown of a nation's monetary system.
Check Germany in 1923mwhen prices rose 2,500% in one month!
Stafglation -is the combination of high unemployment and economic stagnation with inflation .
Check industrialized countries during the 1970s and situation when bad economy faced OPEC rising oil prices.
And so on .. like disinflation -term when inflation is slowing down..
I will write here one example of hyperinflation,just for better understanding,both becaues it is related with inflation and it was my country,and I my olders told me about that.
Well,that was one big country and it was called Yugoslavia.
During 1993 and 1994 it faces really big massive hyperinflation.
Literally,prices are double every 16 hours,for some prolong period of time.
Currency was so called DINAR,same as today.
I remember very well that currencies, like 1.000.000 dinars and 500.000.000.000 dinars,it was really one peace of paper with too much zeros on it, we were all billionaires!
But what is the bad with those billions,we couldn't buy even a one milk with all that billions and billions.
Since inflation goes mad ,and roar every 16 hours ,doubling and doubling the prices.
So money worth nothing during that time .
My parents told me one interesting story ,during that crazy times.
They worked as ordinary people,and the life tempo were not THAT different than elsewhere in the world (they accept hyperinflationary world) ,until the day they got salaries!
That days were like race (they said) with life.
Because since they got their salaries,they had to run to stores to buy whatever they can with that money.
Because prices are going maaaad up and up.
And the bad thing is that they are not alone in that race,by the end of the month (start of the month) others got theirs own salaries as well.
With all that billions ,Yugoslavian people were really happy to buy bread,one milk,maybe coffee,some sugar,and a few more things... and it is all gone .. Day after with thay payment they could buy double less.
I hope that you now understand the power of the inflation.
It really matters because it is so real when you have money and you can't buy anything with that.
You have peace of paper that worth nothing.
There are different ways to imagine inflation but the most useful is that it is a general level of prices.

WELL NOW,there are a few debates among economist ,what causes inflation .
I won't bother you with that , I will mention two things (causes) and one is really basic(I always stick with simplicity and basics).
I have talked about supply and demand above,check it again.
Well major cause that makes prices to go up are forces of demand.
If demand is growing faster than supply,prices will increase.
(This usuallyu occues in growing economies).
I will after CPI article put one current example about this supply - demand and inflation game.
Another cause for increase are costs,they oush inflation.
When the costs of one company goes up,they need to increase prices to maintain their profit margins.
Costs incrising could include such a things as wages,taxes or costs of imports..
Next I will talk about CPI and how it is measure and about it.
You must know that inflation is nothing bad if it is expected to be at some level.
The unexpected (surprising) inflation is bad ,because nobody expect that...
And you must know that as high inflation it is bad to have really low inflation.
It is a good when inflation is not rising quicker that the pace of your (our) wages.

Stay tuned

http://streamstudio.world-television...lash-video-400

Here is a link for Bank of England inflation hearings.
It starts for 13 minutes.

Enjoy.

Most of the information of your thread is awesome thanks for creating this kind of thread...


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Thanks, enjoy.
There will be more

I will upload a few pictures from Bank of England inflation report.

I will sum-up here the most important things.

Inflation is now at 0.5% and could even below 0%,mainly driven by energy prices ,falling OIL prices (I remember the half of past year when they hide big effect of falling energy prices,now there is not a much to hide hehe )

As well BOE is not concern about inflation that much,they are on the way to increase interest rates in 2016 (probably March).
They see that inflation will back to 2 % in next two years ,long term inflation .

Here are projections of possible scenarios .

(take care of 0% deflationary level)

Here projection for near period.


Here energy vs inflation (CPI)


Falling commodity prices (agricultural prices,industrial metals) and inflation (CPI)


Gas prices and inflation (CPI)


I m still preparing one text about CPI,so see ya soon.