How can I get a sense of the economic situation of a country?

By interpreting economic indicators. Forex traders pay enormous attention to economic indicators that governments, central banks and other institutions publish. Remember that not all of them rattle the forex market significantly. The most important indicators are: Gross Domestic Product (GDP), interest rates and the unemployment rate (or jobless rate).

Forex market participants turn their attention to certain economic indicators under certain conditions. What we mean is that over time the focus changes. For example, if prices (inflation) are not a significant problem for a country, but its economic growth is, then traders will pay less attention to the inflation data that comes out, and will pay more attention to the unemployment rate and the GDP.

That's why you need to know what economic indicators are a measure of what. To get a sense of the economic growth of a country look at its GDP figure. If inflation is your interest, take a look at the CPI numbers (Consumer Price Index) as well as the PPI (Producer Price Index). For unemployment info, get the unemployment report for the country of your interest.

Speaking of unemployment, we should mention that there's a unemployment report coming out of the US on a weekly basis which is not as important as the Non-Farm Employment Change and Non-Farm Payroll (NFP), i.e. the monthly change in non-agricultural employment. NFP is typically put out on the first Friday of every month at 08:30 AM New York time and is either the reason or serves as pretext for incredibly crazy forex market moves in major currency pairs even within the time frame of a few minutes. Sometimes it so happens that in the first hour after the NFP number goes public, the rate of a certain currency pair goes 100 pips up and the following hour you see it down some 150 points. No beginner is advised to trade before and after the NFP ... or to put it bluntly, if it's the first Friday of the month forget about trading... but maybe you'd want to stay on the sidelines enjoy the thriller called NFP.

Forex Currency MarketAn example of the effect of NFP (USD/CHF, hourly chart).