Gross Domestic Product (GDP)
The total value of goods and services produced within a country during a specific period. A key economic indicator affecting currencies.
Gross domestic product measures the total monetary value of all finished goods and services produced within a country's borders during a specific period. It is the broadest measure of economic activity and one of the most important fundamental indicators for forex traders. Strong GDP growth tends to support a currency because it increases the likelihood of higher interest rates.
How It Works
- Calculated via expenditure (consumption + investment + government spending + net exports)
- Released quarterly with preliminary, revised, and final readings
- Markets react to the gap between actual and forecast, not the absolute number
- Real GDP adjusts for inflation; traders focus on real GDP for a true growth picture
Trading Tips
Trade the deviation. GDP significantly above or below forecast triggers strong currency moves.
Pay attention to GDP revisions. A large downward revision can be as market-moving as a fresh release.
GDP is a lagging indicator. Pair it with leading indicators like PMI for a more complete picture.
Related Terms
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