Trading Tips

5 Forex News Events that a Trader should be aware of

Forex News Events

Do you know that you miss a lot of potential just because of not trading the news? If you call yourself a technical analyst and see fundamental analysis as alien, you are missing out a lot. 

Fundamental analysis is not that complicated. Just by understanding the 5 Forex new events which are important and tracking them, you would be able to greatly increase the accuracy of your predictions.

Many businesses and agencies all over the world release data on a regular basis. Those data contain important economical information. Some of these agencies also belong to the governments of various countries. 

There are some important Forex news events that every trader should be aware of.  Because they have a huge influence on the market. As an aspiring trader, you may be wondering which Forex news events are important out of hundreds of economic reports that are released every day.

Before we move forward, let us understand a basic concept behind trading Forex news events. Let us understand what effect they have on the market. 

Forex news events have a special power to increase the volatility in the short term. Each of the Forex news events has a certain amount of moving potential. 

The Forex news events which have high moving potential are important; you need to focus on those important news events to be able to take advantage of them.

 It is also important to remember that most watched news and biggest movers come from the United States. So, let us look at some of the important news events that you need to focus on.

1. Gross Domestic Product (GDP)

Gross Domestic Product (GDP) is an important economic indicator and a well-known metric of economics. This is useful in measuring the health of a nation’s economy. GDP represents the total dollar value of all goods and services produced over a given time period.

The GDP calculation takes the following factors into account:

Personal and public consumption.

Public and private investment.

Government spending.

Exports fewer imports.

Bureau of Economic Analysis in the US calculates GDP on a quarterly basis. GDP is usually in percentage. 

Policymakers, trading analysts and even politicians consider this release as one of the important Forex news events due to its market-moving potential.

2. Central Bank Rate Decision

The Central banks of various world economies meet periodically to make decisions regarding interest rates. These decisions are very important and have good potential to move the market.

When the interest rate increases, the value of the country’s currency usually increases. Similarly, the usual consequence of a fall in the interest rate is a decrease in the value of the currency.

Traders can analyze the market by paying attention to the important announcements made by central bank leaders. Traders can also make their predictions based on the forecasts given by banks and brokerages regarding the interest rates.

It is not an exaggeration to say that global interest rates govern the Forex market. A decrease or increase in the interest rates moves the price of the currency up or down, which is exactly what the traders are interested in. 

Monetary policy is also announced during these meetings, which makes Central Bank Rate Decision as one of the important Forex news events.

3. Nonfarm Payrolls (NFP)

Nonfarm Payrolls (NFP) indicates an estimate of the total count of paid employees in the U.S. But it excludes farmworkers, government employees, private household employees and employees of nonprofit organizations. 

NFP is popular for causing the largest rate movements. So it is quite natural for trading analysts, investors, and speculators to anticipate NFP number and the directional movement that it causes. NFP comes out on the first Friday of the month at 8:30 AM EST.

Bureau of Labor Statistics, U.S. Department of Labor is the organization that releases NFP. This report is very important because of the growth of employment and jobs in a country gives a lot of valuable information about the economic growth of a country. 

A higher pay role figure means that it is good for the U.S economy. Among the major Forex news events, NFP plays an important role in the market movement.

4. CPI (Inflation Data)

CPI stands for Consumer Price Index but it is also popularly known as the cost-of-living index. It is calculated monthly, quarterly or yearly.

The index measures the change in the price of a representative basket of goods and services. The list includes food, clothing, housing, energy, transportation, medical care, entertainment, and education in a given period of time.

In other words, CPI measures inflation. In simple terms, inflation is a sustained rise in prices in an economy.

 Investors, employers, and even the government use the inflation rate to make various predictions such as future price increases. If CPI increases, the interest rate also increases. 

This increased interest rate results in the bullish movement for the country’s currency. So without a doubt, CPI falls under the category of the major Forex news events.

5. Unemployment Rate

The Unemployment Rate is the percentage of the people in the workforce who are unemployed but have the ability and will to work. It is the percentage calculated by dividing the number of unemployed workers by the total civilian labor force.

It is important to note that people who are unemployed because of disability or those who are not interested in working do not come under the category of ‘unemployed’ as far as this report is concerned.

Among Forex news events and economic indicators, the unemployment rate is a lagging economic indicator. So, the change in the unemployment rate only occurs after a change has already taken place in the underlying economic conditions. 

Unemployment Rate plays an important role in the moderation of the market volatility. Using this, traders can some idea about future interest rates and monetary policies.