The word “GDP” stands for “Gross Domestic Product” and refers to the value of all national goods and services of a country over a period of time. This index is very important in financial markets and many analysts carefully follow the statistical trend of the GDP for their transactions.
In other words, the GDP indicates the health and probability of economic growth for a country and its national currency.
In 1934, Simon Kuznets calculated and published the GDP index. The GDP index calculates and measures the output and production of finished goods in a country’s economy. Finished product or service means that the product or service is not part of the sales of a larger product or service
There are different calculation methods for the GDP, and if calculated correctly, all methods have the same results!
The United States Economic Analysis Organization uses the following cost calculation method and formula to calculate GDP:
GDP = Consumption (C) + Government Expenditure (G) + Investment (I) + Net Export (NX)
A consumer pays an amount called a cost to benefit from goods or services such as health services or shopping. The amount a consumer pays in an economy to use goods and services is one of the main indicators in calculating GDP.
As you have read, GDP represents the health and growth of the country’s economy, and understanding this concept, we conclude that if GDP is published higher than the previous report, the value of the national currency will increase.
And if the GDP rate decreases, we will see a weakening of the national currency!
The initial GDP index is published four weeks after the end of each season and the final GDP index is published three months after the end of each season at a specific time for each country.
Financial market analysts have average expectations for GDP indicators in different countries. For the United States and the US dollar, for example, experts expect annual GDP growth of 2.5% to 3.5% and conduct their long-term analyzes based on these modelings.
For Forex traders, the GDP index is a very important factor for trading analysis. They also use this index to forecast bank interest rates.
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