The importance of economic news to currency pairs is clear. Nonfarm payrolls (NFP) data released by the U.S. Bureau of Labor Statistics (BLS) on the first Friday of every month will impact most of the currency pairs involving the U.S. dollar. An increase in the forecast of NFP is generally considered bullish for the U.S. Dollar and will have a bearish impact on EUR/USD/JPY.
When it comes to trading news, it is often best to wait for a period of consolidation ahead of a major number. Once the news is released, traders can then trade on the news itself. This can be done in the short term or over multiple days. In the example above, the euro was holding its breath before the October number was released. However, it is important to remember that volatility can prevent the right moves from being sustained. As such, it is imperative to follow economic news releases to trade in the market.
As the World Economic Forum gathers in Davos, Switzerland, the risks are rising. Pandemics, widening inequality, and fears of an economic slowdown weigh heavily on the minds of world leaders. In another example, a Ukrainian group remodeled a former Russian leader’s meeting room, demonstrating the political power of economics. Meanwhile, the Reserve Bank of New Zealand raised its benchmark interest rate to counter the impact of global instability.
While economic announcements are usually interpreted according to the leading economists’ consensus, the impact of a change in GDP, unemployment rate, or inflation can affect a currency’s value. Low unemployment and high inflation may be indicators of a strong economy, while a low rate of interest could indicate a weak economy and cause its currency to fall against other world currencies. If the changes are substantial, though, the repercussions are usually minor.
A great economic news app is CNBC Breaking Business News. The app delivers up-to-the-minute market news, financial data, and stock picks from the company’s analysts. The app provides customizable alerts and helps you monitor specific stocks and their associated news. It’s also a good choice for mobile devices. The CNBC app lets you watch full episodes of CNBC’s Breaking Business News and other shows. In addition to providing up-to-date market data and business news headlines, it also gives you access to award-winning Bloomberg journalists’ articles.
Traders increasingly incorporate economic news into their trading strategy. While news releases may not have a direct impact on currencies, they can help strengthen a trading strategy. The key is to pay attention to when news releases are scheduled and which ones will affect currency prices. Learning how to trade economic news is crucial to success in the forex markets. You can add economic news to your trading strategy by combining it with your current charting approach. And while news trading is not for everyone, it’s definitely worth trying.
Arjen van Dalen is a Professor with Special Responsibilities at the Centre for Journalism, University of Southern Denmark. He wrote his PhD dissertation on Political Journalism in Comparative Perspective. His research interests include economic news and journalists’ interactions with political leaders. He has published in Journalism Studies, Journal of Press/Politics, and Public Opinion Quarterly. So, if you’re a journalist or want to learn more about the effects of economic news, read this book!
In a normal growth period, the PMI will hover around the 55-60 range. But how can you interpret the PMI? The trick is to look for a trend. A rising PMI is generally considered bullish for the currency it’s associated with. So, for example, the UK PMI could go from 52 to 55 over the last few months, while the US PMI might go from 52 to 53. These are all examples of what we mean by economic news.