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Using The GDP Report To Minimise Losses On The Foreign Exchange
The GDP (Gross Domestic Product) report is released quarterly. It is a strong indicator of the current economic climate, and foreign exchange traders, investors and currency brokers watch it closely to see what the impact will be on their trading accounts.
As the GDP is a potentially market-moving report, it is subject to sudden changes which can lead to large price movements. Therefore when the GDP report is released traders have already taken effective risk management steps to protect their trading accounts – this applies whether they are day traders or long-term investors.
Ignoring the risks is a common fault in foreign currency trading. The high degree of leverage means losses can occur quickly, even with quite modest trades. Anybody who makes regular money transfers abroad is a player in the game, even if they’re not directly involved. By understanding the market impact of the GDP report, they can see if the rates offered by their banks or currency brokers are truly transparent.
The UK GDP is obviously the gross product of the British economy, and is released quarterly and yearly. Capital consumption (capital assets eroded during production) is not subtracted, giving a clearer indication of the effects on foreign trading. In late summer, the UK publishes an annual estimate as part of the UK National Accounts. However, foreign exchange traders rely mainly on the quarterly estimates, which are regularly updated.
We at Pure FX pay close attention to the latest GDP estimates and take the relative risk management steps, protecting our customers’ profits and minimising any losses.
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