Traders across the globe use Gross Domestic Product or GDP as an indicator for trading forex currency pairs. Rise of fall in GDP figures compared to previous figures can be regarded as the growth or decline of the economy of the nation concerned. The underlying idea is if the GDP is getting better then the interest rate of the nation will follow the same pattern. It can be regarded as a good indicator because it is prepared by standard government agencies and are released at regular intervals like monthly, bimonthly or quarterly.

Gross Domestic Product is the total value of all goods and services produced in a country. It is derived by taking account of the total consumption expenditures of the households, total investments on business or infrastructure, government spending or investments and of net trade balance that is net export minus net import. The values derived are compared with previous quarters or years value to determine GDP growth or decline.

Usually the forex market has high expectation of GDP values; and traders often position themselves to benefit from these releases. An expected reading cause not much fluctuations in the market compared to releasing of lower-then-expected or higher-than-expected figures.

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