Bloomberg Market Concept - Economic Indicators

ECONOMIC GROWTH

GDP=C+I+G+(X-M)

Norminal GDP growth%-inflation%=real GDP growth (%)

CURRENCIES

Currency market mechanics

ECTR=>economic trade flow=> import/export
Main currency converter: financial investors/corporation/travelers
Gold standard
Pegged currency (Bretton Woods)—currency reserves e.g. Argentine peso 2002 fall/Mexican peso in 1994/British sterling in 1992 fall; 1997 HK increase
Interest rate

Q: what action created the modern currency market: US president Nixon suspending the convertibility of US dollars into gold (MOST RECENT)

2. Currency valuation

FXC: currency rate matrix; “Tradeweighted” index baslets express currency overall strength and weakness=>higher strong $
BIG MAC=>buger price=>over/under value
In the long run, the law of one price decides value of currency
In short run: the three main currency drivers: surprise changes in interest rates=>interest rate currency more attractive e.g. Euro (interest rate &currency)/surprise changes in inflation=> weaken currency e.g. Indian Rupee (inflation &currency)/surprise changes in trade=>surplus of trade=>home currency increase e.g. Russian (oil&currency)

Q: the greater the supply of money, the lower the value of that money

3. Central banks and currency

IFMO-world inflation (target 2%)
FDTR index-interest rate (& inflation related)
Deflation: japan in 2013 (inflation & currency opposite)
Inflation can lead to a vicious cycle of pay increases leading to price increase
Deflation can lead to a vicious cycle of purchase deferrals and layoffs

Q: central banks target a certain inflation rate to create a stable business environment

4. Currency risk

WEI: world equity index
TPX index: while the TOPIX rose, the yen weakened
Two tools access currency risks: historic volatility of currency pair values/analyst forecasts of currency pairs
FRD: future exchange forward rateàlock currency by using forward market
Gold reserve, XAU: gold spot->gold inflation

Terminal functions:

ECTR: interactive trade flow

FXCA: currency conversion calculator

PEG: table of currencies linked to other currencies

WIRA: currency reserves

GP: prices chart used to identify trends and market patterns

FXTF: library of all the world’s currencies FXC: matrix of currency exchange rates

WBG: big mac index

IFM: world inflation monitor

WEI: world equity index monitor

FXFC: displays foreign exchange rate forecasts

WGO: the gold reserves of major countries