Market Impact: High

Gross domestic product is reported on a quarterly basis, this report measures the total economic activity of a country. A positive GDP report, say +0.75% means the nation’s income grew to about that much within the last 3 months. GDP is a factor that influences monetary policies. A better than expected GDP growth can trigger inflation, so as the need to raise the interest rate to slow down excessive demand for money. However, when things slow down, it is a sign of an easing cycle allowing money to flow more freely.

The effect on the currency market varies from each currency trader’s perspective. For instance, when a currency with a high interest rate is bought for the purpose of a higher yield, its effect would make its value rise further due to the fact that it is highly demanded for its high yield. Although the demand for a currency with a high interest rate is also decreased, because its supply is restricted.

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