Economies are consumer driven; meaning that consumer spending is one of the biggest indicators of economic strength, a crucial factor for the FX trading market. With such a huge reliance on the habits of shoppers, the Consumer Confidence Index is a key resource for anyone using a forex trading platform, assuming they want to turn a profit.
Consumer Confidence Index
Released on the last Tuesday of each month, the Consumer Confidence Index (CCI) is a survey of 5,000 residents of the United States. It asks them how they perceive the current economy and financial conditions. Studies have shown that consumers who are happy and confident in the economy will travel and shop more consistently, but those who are uncertain about the economy and job market will be more hesitant to recklessly spend money. The more confident that consumers are, the better condition the economy is in, typically. This is good news for forex trading investors looking to invest in US currency.
The CCI is also important in discovering consumer patterns, especially in purchasing expensive items, which is a huge indicator, because people are far less likely to spend large sums of money if they are unsure about the economy. In addition, the CCI surveyors ask poll-takers for their opinions about the future state of the economy.
An average Consumer Confidence Index score is around 100. A rating below 75 is considered poor and numbers higher than 125 are exceptional. Consult this reports results when investing with your
forex broker.
FX Trading Significance
Pessimistic consumers are a warning sign that an economy is sliding down or tanking. Forex trading aims to invest in the strongest currencies, which the Consumer Confidence Index helps to predict.
The downside with the Consumer Confidence Index is that most experts believe there is only a minimal correlation between consumer confidence and consumer spending. This means that as a
forex resource, the CCI is not the best indicator of actual results, just theoretical possibilities. FX trading can be affected by sharp drops in CCI ratings, but changes in the CCI are only significant if the change is at least 5 points. Otherwise, do not make rash investing decisions with your forex trading platform when a shift occurs.
Practice FX Trading
If you are inexperienced with forex trading platforms but interested in starting, try your hand at a free
forex demo account. This program simulates a real forex broker, but does not cost any money, thus reducing the risk. After using the practice account to analyze forex news for a few months, you should be ready to start investing real money.
