FX Trading: Frequently Used Indexes

Reading an index or multiple indexes can be a useful way of monitoring your trades. They can help you know when to make a lucrative trade with your forex broker in the FX trading market. Below is a list of some commonly used indexes in FX trading:



• ANZ Commodity Price Index

• Consumer Confidence Index

• Consumer Price Index

• Core PCE Price Index

• Employment Cost Index

• Ivey Purchasing Managers Index (PCI)

• PCE Price Index

• Philadelphia Fed Index

• Producer Price Index



Understanding how these forex resources work can help improve your trading techniques. You can decide which indexes fit into your style of forex trading, and which to overlook. Below we will discuss the ANZ Commodity Price Index, the Employment Cost Index, and the Philadelphia Fed Index.



ANZ Commodity Price Index:



The "ANZ" in ANZ Commodity Price Index stands for "Australia and New Zealand Group Limited." ANZ is a major Australian banking and financial institution. This index measures the monthly price changes (in percentage) for 17 of New Zealand’s and Australia’s main commodity exports. Exportation is a driving force behind both countries’ economies, and changes in export sales and prices can affect overall GDP and current currency exchange rates on forex trading platforms. Any change in the price of exports can be a great future predictor for increases and decreases in the Australian dollar, important to forex brokers. Updates for the ANZ Commodity Price Index appear during the first week of every month.



The ANZ in not to be confused with the RBA. The RBA is the central bank in Australia governing the monetary system. The RBA controls when to increase or decrease interest rates.



Employment Cost Index:



The ECI, or Employment Cost Index, is widely accepted as the best overall measurements of labor costs and growth for businesses in a country. The ECI can be a great indicator that signals changes in wage inflation.



The most important take away from the ECI is that large increases in the ECI can cause a country’s central bank to raise interest rates. If the ECI signals changes in wage inflation, a large increase in the ECI would mean that wages being paid to employees are inflated. Wage inflation can lead to higher overall inflation. To counteract inflation, the central banks will oftentimes raise interest rates. Higher interest rates tend to strengthen exchange rates. The Employment Cost Index is released monthly for many countries



Philadelphia Fed Index:



Also known as the Business Outlook Survey, the Philadelphia Federal Index measures growth or contraction in the manufacturing industry in the United States. This index is released on the third week of each month by the Federal Reserve Bank of Philadelphia. It’s a survey-based measurement about data collected from the previous month. For example, February’s report will be based off of figures collected in January. The survey is administered to owners and employees that are part of the manufacturing industries of Delaware, Philadelphia, and New Jersey.



Increases or decreases in manufacturing can be key indicators for the country’s economic behavior on the whole, thus making it a good indicator for FX trading. If more stuff is being made, chances are that more stuff is being bought and sold. Although this index only measures a region of the U.S., it is still considered to a representative sample of the nation’s manufacturing industries and a heavy weight on the U.S. Dollar. The index is reported in either a positive or negative number. A figure above zero indicates that the manufacturing industry is growing, whereas a negative number represents industry contraction for manufacturing. The Philadelphia Fed Index is a usually a good predictor of the PMI (Ivey Purchasing Managers Index).