Indicators of the cash

The amount of money in circulation, for the Forex market is a significant factor in forming the exchange rate. And because the bulk of the world's money is still concentrated in the United States, published weekly in the financial news on the quantity of money in this country, usually alter exchange rates. In the U.S., rates of money is usually published every week on Thursdays at 16:30 EST (New York), describing the week's change in money supply.

Trader, beginner forex trading market, you need to know the nature of these indicators and learn how to use them in trade.

Indicators that measure the amount of money in circulation, known as monetary aggregates. Monetary aggregates are kinds of money and money, varying degrees of liquidity, they take into account the amount of money of different species, describing their structure. The composition of monetary aggregates for different countries is determined in different ways, but most often uses the following units:

M0 - cash;

M1 - cash in circulation outside banks, checks, deposits, other check deposits;

M2 = M1 + time deposits at banks, nechekovye savings deposits;

M3 = M2 + short-term government bonds;

M4 - is the total monetary aggregate.

In the United States is considered a major indicator of aggregate M2 (leading economic indicator), which is measured as a percentage of the previous value or the percentage of GDP. For most European countries, traditionally the most important is the monetary aggregate M3, UK - M4. The IMF expects the total figure for all countries of M1 and the broader indicator kvazidengi (time and savings bank accounts and most liquid financial instruments, the relevant levels of aggregation, M2 and M3).
The influence of monetary aggregates in the exchange rate is assessed primarily through their relationship with the stages of economic cycles. Usually, all monetary aggregates show the maximum growth before the recession and the minimum growth at the end of the recession, the monetary aggregates have become reliable indicators of coming economic growth. Indicators of money supply M2 is not the main economic indicators in the United States, but its current levels can be predictive of the acceleration or slowdown in the U.S. economy, and therefore the entire world economy. Monetary aggregates are closely linked to inflation (especially M3). Accelerating the pace of growth of monetary aggregates can lead to increased inflationary pressures. Monetary aggregates are also closely linked with the basic interest rate.



Trader when trading in the Forex market it is necessary to remember the main rule - rapid growth in money supply, both in cash and in non-cash form, has a downward impact on the currency. Happy trading.