The popularity of news trading has increased these days as it offers higher opportunities to generate huge profits within a comparatively short period. However, not all pieces of forex market news leave the same impact on price movements. You may open an economic calendar to see which news leaves a greater impact and which you may ignore. It also depends on which currency pair you want to trade as well.
Most focused currencies
You should focus on at least eight major currencies; not only because there are always news releases related to them, but also because they are available on most brokers, which makes it easier for you to trade them from anywhere, under any jurisdiction. With seven or more pieces of news related to these currencies releasing on every weekday provides plenty of opportunities to traders who rely on the news for trading. The currencies are USD, GBP, EUR, JPY, AUD, CAD, CHF, and NZD. The liquid currency pairs derived from these currencies include EURUSD, AUDUSD, USDJPY, EURCHF, GBPJPY, and CHFJPY. Now, once you choose a currency pair from these to trade, concentrate on the news releases related to that particular pair.
Key forex news releases
It does not matter if you are an active news trader or not, these news releases are always crucial for you –
- Gross Domestic Product (GDP)
The GDP of a country stands for the yearly change in the inflation-adjusted value of each service and product created in the economy. The US GDP is the most important release and it is released on a quarterly basis by the Bureau of Economic Analysis. Although it is not possible for a central bank like Federal Reserve to decide on the final interest rate from GDP only, it still stands as a crucial piece of evidence to make those decisions. If the GDP trends are high, it signals the growth of the economy and the probability of interest rates rising higher. Similarly, when it moves lower, it indicates an economic slow-down where it is needed to cut interest rates.
- Central bank meetings
Central bank meetings and interest rate decisions are two of the most crucial forex news releases. It is the central banks’ work to control inflation and make sure to keep the national currency steady in value; and by doing this, they create a great impact on the volatility of the forex market. The meetings are held at monthly intervals generally, to discuss policy plans and set interest rates. Whether the rates are unchanged, raised, or lowered, the decision becomes somewhat effective. For the US dollar, a raising rate is most likely to be bullish, while a rate cut is likely to be bearish. As a forex trader, you must focus on the statement that comes accompanying the interest rate policy. It is your job to analyze if there is even a slight change in wording in it from the statement of the previous month because even the slightest difference can turn the markets crazy.
- Consumer Price Index (CPI)
CPI refers to the change in the value of a basket of goods and services. To put it simply, it measures inflation. The US CPI is one of the most important releases and it is released on a monthly basis. The basket holds a fixed set of services and products based on average consumer habits collected by the Bureau of Labor Statistics. When the price of a good or service moves up; it is known as inflation. The CPI is used to track inflation and it is directly related to interest rate policy. When inflation is high, the Fed needs to cool off the economy by raising rates. When inflation is low, the Fed is more likely to stimulate growth by cutting rates.
Some more important forex market news releases include unemployment rate, overnight interest rate, US nonfarm payrolls (NFP) data, and retail sales.