Interest rate is one the major factors that affects a country's currency, basically because it provides income for investors. It is logical for investors to hold a currency that brings in the highest possible interest. For example, if 1 year fixed deposit rate of Australian Dollar is 3.5% and 0.25% for the US Dollar, rational investors will tend to hold AUD and sell USD.

Furthermore, interest rate change anticipation also plays a major role in currency fluctuations. An appreciation of AUD could be expected when the interest rate spread between AUD and USD widens, and vice versa.

3.3.1 Non-farm Payrolls (Importance: )

Non-farm payrolls represents the total number of paid U.S. workers of any business, excluding the following employees: general government employees, private household employees and employees of non-profit organizations. It generally occurs on the first Friday of the month.

Typically, non-farm payrolls indicates the conditions of the economy. When non-farm payrolls drops, it represents companies lower its production and resulting a downturn in the economy. If non-farm payrolls stimulates, a healthy economy is expected and in theory it benefits the currency. Therefore, non-farm payrolls is an important indicator that influences the economy and the development of the financial market.

3.3.2 Housing Starts and Building Permits (Importance: )

In US, "housing starts" separates into two kinds- single and group of houses. When single house is constructed, it is indexed to 1. For a group of house that contains 100 units, it is indexed to 100. Normally, experts place a higher weight on single house building because the units in group of house could be change in any time and leads to variability of the data. Housing starts and building permits have become relatively important nowadays in Western countries as it reflects the condition of the economy. Housing construction is recognized as an "investment". It helps to stimulate the economy since employment rate will increase when "Housing starts" increases.

Moreover, the construction of new houses has a chain effect on other industries such as manufacturing, raw materials, mortgage sector etc. and boosts the entire economy. In theory, a country’s currency benefits when housing starts and building permits increase. When they drop unexpectedly, there will be a pressure on one country’s currency.

3.3.3 New Home Sales (Importance: )

An economic indicator that measures sales of newly built homes. A new home sale is considered to be any deposit or contract signing either in the year the house was built or the year after it was built. This indicator is released by the U.S. Department of Commerce's Census Bureau at the end of the month.

In general, the purchase of new house often involves mortgage, hence new home sales is affected directly by the mortgage rate. New home sales play a major role in the retail sector. It reflects the condition of the real estate market. When the consumption is strong in real estate properties, it reveals the economy is in a good shape and theoretically benefits a country’s currency. Furthermore, new home sales are positively related to the housing starts and building permits. If housing starts and building permits lower, new home sales are expected to be decreased.

3.3.4 Producer Price Index (Importance: )

Producer Price Index known as PPI measures the average change in selling prices received by domestic producers of goods and services over time. It is viewed as an indication of the inflation level. PPIs measure price change from the perspective of the seller. The PPI looks at three areas of production: industry-based, commodity-based, and stage-of-processing-based companies. In US, PPI is measured by the US Bureau of Labor Statics. Most of the data is collected through survey from producers in manufacturing, mining, and service industries with around 2300 types of commodities, afterward, it is compared against the basic index year which is 1967.

In general, when a large and sustained and accelerated increase in the producer price index, the country's central bank reaction is to take the rate hike countermeasures to prevent the rapid rise in inflation, the increased possibility of the appreciation of the national currency.

3.3.5 Retail Sales (Importance: )

The retail sales report captures in-store sales as well as catalogue and other out-of-store sales. Retail sales report as a major indicator of the economy reflects the change of customers’ consumption level. In some developed Countries, retail sales become a big component of total gross domestic product (GDP). Higher retail sales may represent a better economy and results in higher interest rate, eventually benefits the value of the currency.

In US, generally a monthly economic indicator is compiled and released by the Census Bureau and the Department of Commerce in United States. The report covers the previous month, and is released about two weeks after the month-end. The report also breaks down sales figures into groups such as food and beverages, clothing, and autos. The results are often presented two ways: with and without auto sales being counted, because their high sticker price can add extra volatility to the data.

3.3.6 Index of Consumer Sentiment (Importance: )

Index of Consumer Sentiment is known as the level of consumer’s confidence that measures the optimistic level of consumers to the economy in the near future.

The report is conducted through random sampling that includes the comments of consumers view on current and expected economy condition, employment rate and personal financial position. By comparison to the University of Michigan Consumer Confidence Index, the fluctuation of Index of Consumer Sentiment is relatively larger which indeed lowers the reliability.

Overall, the fundamental idea is that if the consumers are optimistic and rational, they will tend to purchase more goods and services. This increase in spending will inevitably stimulate the whole economy and may lead to a higher interest rate and benefits the currency.

3.3.7 Durable Goods Orders (Importance: )

Durable goods orders is a monthly economic indicator released by the Bureau of Census that reflects on new orders placed with domestic manufacturers for delivery of factory hard goods (durable goods) in the near future and the level of manufacturing activity.

Overall, orders for factory hard goods can provide information on how busy factories will be in the future. Orders placed in current months may provide work in factories for many months to come as they work to fill the orders. Rising durable goods orders are normally associated with stronger economic activity and can therefore lead to higher short-term interest rates, which is usually supportive for a currency.

3.3.8 ISM Manufacturing Index (Importance: )

An index based on surveys of more than 300 manufacturing firms by the Institute of Supply Management. It monitors the employment level, production inventories, new orders and supplier deliveries and based on these surveys, a composite diffusion index is created to illustrate the conditions in national manufacturing in United States.

By monitoring the ISM Manufacturing Index, investors are able to better understand national economic conditions. When this index is increasing, investors can assume that the stock markets will go up because of higher corporate profits.

3.3.9 Jobless Claims (Importance: )

A measure of the number of jobless claims filed by individuals seeking to receive state jobless benefits. This number is watched closely by financial analysts because it provides insight into the direction of the economy. Higher initial claims correlate with a weakening economy.

The strength of a nation's economy will have an impact on the value of its currency. Therefore, forex traders typically look at the initial claims figure as part of their analyses when assessing a currency's prospects for the immediate future. Generally speaking, week-by-week numbers are too volatile to get an accurate picture of economic changes, so four-week moving averages are typically used for the initial claims metric.

3.3.10 Purchasing Manager Index (Importance: )

An indicator of the economic health of the manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment. A PMI of more than 50 represents expansion of the manufacturing sector, compared to the previous month. A reading under 50 represents a contraction, while a reading at 50 indicates no change. Prior to September 1, 2001, the acronym (PMI) stood for Purchasing Managers' Index. The Institute of Supply Management (ISM) now uses only the acronym, PMI. Although the ISM publishes several indexes, the PMI is the most widely followed and is sometimes referred to as the ISM index.

3.3.11 Unemployment Rate (Importance: )

The percentage of the total labour force that is unemployed but actively seeking employment and willing to work.

From 1948 to 2004, the monthly U.S. unemployment rate has ranged between about 2.5% to 10.8%, averaging approximately 5.6%. The unemployment rate is considered a lagging indicator, confirming but not foreshadowing long-term market trends. An unemployment rate equal or lower than 3.0% is considered "full employment" in U.S.

3.3.12 University of Michigan Consumer Sentiment Index (Importance: )

University of Michigan Consumer Sentiment Index is a regular survey conducted by the researchers of University of Michigan on consumers about the assessment of personal financial status and national economic status.

Researchers of University of Michigan use the raw survey data from 500-600 adults, and calculate the seasonal adjusted consumer confidence, current index and expected index. Researchers set the result of the first quarter of 1966 100 for the need of index calculation.

For a long time, the data is a valuable guideline for the change of consumer attitude, which can be used to predict consumer behaviour. In addition, compared with other data which serve similar purposes, this data has lower volatility and higher stability. There is close correlation between this index and consumer spending.

If this index rises, the bond market will be treated as bearish and bond price will fall; stock market will be treated as bullish. There is hint for the US dollar exchange rate from the Fed, if consumer confidence rise, consumption will grow, and economy will be stronger; then Fed will raise interest rates, and US dollar exchange rate will be stronger.