The level of economic news is based on what leading economists deem important. Economic announcements pertaining to GDP growth and non-farm payrolls can have a profound effect on markets. If unemployment is low, the economy may be doing well, but if interest rates are low, the country’s currency will be less attractive and will fall against other world currencies. These are all factors to consider before deciding how much to pay for economic news.
To test these assertions, we will examine 800,000 Wall Street Journal articles from the Dow Jones News Archive. We will analyze these articles to determine how they relate to specific topics and themes. By using these estimates, we can calculate the proportion of news attention devoted to each of these themes. We will then use these estimates in statistical models of numerical economic time series. While these estimates are based on the findings of other studies, this research has implications beyond the economy.
For example, the Purchasing Managers Index (PMI) measures the strength of the U.S. economy. Purchasing managers in major economies rate their business prospects. The index helps investors gauge the strength of the economy by providing commentary on trends and economic conditions. You can listen to podcasts or subscribe to RSS feeds for updates. Several other metrics are also included in the PMI. And don’t forget about the Dow Jones Industrial Average, which measures the overall strength of the U.S. economy.
While understanding the Fed’s monetary policy is a complex process, a number of recent events are a good starting point to assess economic data. A revised estimate of Japanese industrial production for April indicated a larger decline than originally reported. Similarly, wholesale price inflation in India increased more than expected, following an unexpected slowdown in consumer prices. As markets awaited tomorrow’s monetary policy announcement, the Bank of Japan increased bond purchases to maintain the benchmark 10-year bond at target levels.
Important news for currencies is employment numbers, interest rate decisions, and GDP numbers. When these are released, they can influence Federal Reserve decision making. You can trade on the news, either on a short-term basis or for several days. As with any major event, it’s crucial to stay abreast of the latest economic news to keep your trading strategy on track. With the right economic data, you can maximize your profits by investing in currencies and making money.
Forex trading news is most affected by macroeconomic news. This news affects the economies of whole nations. Knowing what factors are driving these currencies’ prices can help you make an informed decision on whether to trade on the news or not. For example, when a central bank is dovish, the currency of the country will tend to rise or fall. The other way that forex news can affect currencies is by affecting the price of a major commodity.
In the weeks leading up to a major economic release, volatility can increase or decrease dramatically. Figure 3 shows the price action of major currency pairs in the week following the release of a new report. On Nov. 4, 2005, the market had expected the U.S. economy to gain 120,000 jobs, but instead only accumulated 56,000. This disappointing news triggered a 60-pip sell-off of the dollar against the euro.
Although there are pros and cons to news-based trading, the downsides outweigh the advantages. It requires expert fundamental analysis skills and an understanding of economic announcements. Also, news-based trading may involve carrying positions for longer periods of time. They may be open for several days. Additionally, overnight risk may be associated with the position and requires additional holding costs. So, it’s important to understand the risks and rewards of news-based trading.
A recent economic report from the European Central Bank suggests that interest rates in Europe will likely rise over the coming months, but it will be gradual. Meanwhile, the central bank’s leadership expressed concern that excessive monetary tightening could cause a recession. It’s vital to pay attention to the economic news and understand its implications in terms of global monetary policy. If you follow these warnings, you’ll be on the right track. And don’t forget to stay tuned for more news!