Leading Indicators
From FXPedia
Each of the three primary financial markets are affected in different ways by the leading indicators and what may be seen as a positive sign for one, may be detrimental to another. While it is not possible to reduce a discussion on market influences to absolutes, there are basic premises that all analysts watch for each market.
Foreign Exchange Market
- Referred to by various names including FX, forex, and foreign exchange, the foreign exchange market values one currency against another in a currency pair. Investors look for currency pairs in which they can profit from a rise or fall in the value of one currency against the other; therefore, it is imperative to understand the economic conditions that enable a country’s currency to rise in value.
Bond Market
- The bond market is also known as the fixed income or debt market and it provides participants with a venue for buying and selling fixed income securities. The bond market is considered highly volatile as interest rates can vary dramatically during the maturity period of a multi-year bond. Rising interest rates can make the buying of a ten-year bond that seemed a good investment when interest rates were low or falling, suddenly seem much less attractive. For this reason, bond investors are particularly interested in future interest rates and watch the indicators carefully for clues as to possible changes in monetary policy that could affect interest rates.
Stock Market
- The stock – or equities – market lists companies whose stock is publically traded. Because stock price is intrinsically linked to the value of a company or the sector in which the company operates, investors review the leading indicators to evaluate current economic conditions to try to determine future conditions. Using this information, analysts attempt to identify investment opportunities with potential for returns that fit their investment strategies.
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