Fundamental Analysis Terms

The Beige Book is a qualitative Federal Reserve report that summarizes economic conditions ahead of each FOMC meeting.

Central banks control monetary policy, set interest rates, and manage currency supply. The Fed, ECB, BOJ, and BOE are the most influential for forex trading.

Consumer confidence gauges household optimism about the economy; rising sentiment supports spending and risk appetite.

Core inflation excludes volatile items such as food and energy, giving central banks a clearer read on underlying price trends.

The current account records trade in goods, services, and income flows, showing whether a country runs a surplus or deficit.

A current account deficit means a country imports more goods, services, and income than it exports, relying on foreign financing.

Durable goods orders track new orders for products meant to last at least three years, offering insight into manufacturing demand.

The fed funds rate is the U.S. overnight interbank lending rate set by the Federal Reserve, anchoring global short-term interest rates.

Fiscal policy encompasses government decisions on taxation and spending, influencing economic growth, deficits, and currency strength.

The FOMC is the Federal Reserve committee that sets U.S. monetary policy through rate decisions, balance sheet plans, and forward guidance.

Forward guidance is a communication tool where central banks outline future policy intentions to steer market expectations.

Fundamental analysis studies economic indicators, central bank policies, and geopolitical events to determine currency values and predict long-term trends.

Housing starts measure the number of new residential construction projects begun, acting as a leading gauge of economic momentum.

Industrial production tracks overall output from factories, mines, and utilities, offering insight into the health of the real economy.

Inflation is the rate prices increase over time, measured by CPI. Moderate inflation (2%) is healthy. High inflation weakens currency as central banks raise rates to control it.

Interest rates are the cost of borrowing money, set by central banks. Higher rates attract foreign investment, strengthening the currency. Rate differentials drive carry trades.

Monetary policy is the central bank’s use of interest rates, balance sheet tools, and guidance to manage inflation, employment, and financial stability.

The Producer Price Index tracks price changes received by domestic producers, offering an early look at inflation pressures before they reach consumers.

Quantitative Tightening is when a central bank shrinks its balance sheet by letting assets roll off or selling them, withdrawing liquidity from markets.

A recession is a sustained decline in economic activity marked by falling GDP, rising unemployment, and weak demand. It usually leads to easier monetary policy, safe-haven flows, and elevated forex volatility.

Retail sales track consumer spending at stores and online, a critical gauge of demand in consumption-driven economies.

Tapering occurs when a central bank reduces asset purchases, signaling a shift away from emergency quantitative easing toward tighter policy.

The unemployment rate shows the share of the labor force that is jobless but actively seeking work. Shifts in unemployment influence central bank decisions and currency strength through growth and inflation expectations.

Wage growth tracks how quickly workers’ pay is rising. It feeds into inflation expectations and central bank policy, influencing currency valuations.