Currencies do not change their exchange rates on their own – they are stimulated by economic news. This data can be used for evaluating possible scenarios in financial markets. See below a general guide on the use of the Economic calendar to reach better results in your Forex trading.
Before you start trading, take a look at the Economic calendar to check important events of the week. The calendar can help you detect the key events in the currency market and make money without fearing for it in aggressive currency movements.
What is the Economic calendar?
The Economic calendar is also known as the Forex calendar. It contains a list of news published by governments and agencies, sorted by date. Here are some examples of such agencies:
* US Bureau of Labor Statistics (publishes economic data from the USA)
* Eurostat (published economic data from the EU)
* Office for National Statistics ( published economic data from Great Britain)
* IHS Markit (published the PMI of most countries).
How to read economic news right?
Economic calendars contain the dates of the most important national and international events that can influence the movements of some assets and markets. The date and characteristic of every event on the calendar can be used as a forex calendar indicator for making better trading forecasts.
All events on the Economic calendar forex have different significance and market influence. There are the following levels of significance:
The news or statistics from this category have almost no noticeable influence on the market. However, If there is no more important news on the horizon, certain price fluctuations might happen.
In certain circumstances, such events can influence currency rates. However, the market might not react at all, if something more important happens at the same time. Still, several publications of moderate significance can give the market certain dynamics.
Such events influence currency rates significantly, especially if they are published one by one. A combination of such events can change the trend in an instrument. This category includes such events as reports of Central banks and their interest rate decisions, speeches of the heads of national Banks, the GDP statistics of major economies, the Non-Farm Payrolls, etc.
The most important news of Forex economic calendar
The Non-Farm Payrolls (NFP)
This indicator tracks the employment of the biggest part of the US solvent population. The US Bureau of Labor Statistics publishes reports on the first Friday of every month. The reports show the number of new workplaces created the month before, the general unemployment rate over the country, and the level of economic activity. Moreover, it shows the number of Americans that search for a job efficiently or have made a profit on it. Each of these three values indicates the general economic situation in the country. These statistics influence both market sentiment and the attitude towards the USD.
Central banks’ decisions on the interest rate
In the USA, the function of a Central bank is carried out by the Federal Reserve system (known as the Fed). Apart from the Fed, there are 7 more influential banks in the world: the Banks of Australia, England, Canada, Japan, the European Central bank, the Reserve bank of New Zealand, and the Swiss National bank. Their decisions on the interest rate most noticeably influence risk evaluation and potential results of Forex traders. Speeches of monetary politicians in the reports of such banks have special influence on Forex and in most cases, increases the volatility of its assets.
The Economic calendar is crucial for Forex traders because with it, they can plan their trading in advance. Many economic news can provoke unexpected reactions when the market moves by thousands points in a split second, so try to stick to your money management rules to avoid such shocks.