If anything moves the Forex market, it is the news. Economic news comes out regularly, so traders know beforehand what to prepare for.
As a trader, utilizing Forex market news to your advantage means knowing when the market moves and being ready to act. Here are four Forex market news a trader does not want to miss:
- The Non-Farm Payrolls report
- Inflation reports
- PMI releases
- Central banks’ interest rate decisions
Non-Farm Payrolls
The Non-Farm Payrolls (NFP) report is one of the most important economic releases directly impacting the FX market. It is released in the United States typically on the first Friday of each month and shows the state of the US jobs market in the previous month.
Because the Federal Reserve of the United States has a dual mandate of price stability and job creation, the second part of its mandate is directly dependent on the jobs market. Hence, deviations from what economists expect in terms of the number of new jobs created in a month, the unemployment rate level, the labour participation rate, etc., will cause massive volatility in the US dollar pairs, and not only.
It is fair to say that the biggest FX market volatility happens during the release of the monthly NFP report.
Inflation Reports
Every central bank aims at price stability. The definition of price stability requires inflation around the 2% level.
Hence, when inflation reports are due, the market participants listen.
Because the US is the largest economy in the world, the US inflation report has the biggest impact on the market. This is because the US economy might export inflation or deflation because it has many trading partners worldwide. Hence, local inflation can easily be exported, and thus, the local US inflation report is closely watched by traders all over the world.
Other inflation reports with an impact on the FX market are released in the United Kingdom, the Euro area, Australia, Canada, and New Zealand. Inflation reports are released monthly.
PMIs
The PMI acronym stands for Purchasing Managers Index. This is a monthly release for every economy and different sectors, such as manufacturing, services, or construction.
The data is interpreted in relation to the 50 level. A print higher than 50 suggests that the sector is in economic expansion, while a print below 50 shows contractionary territory.
Details do matter. Traders look at the employment level in each sector, how prices paid evolved, and at other clues to form an educated guess regarding the next step the central bank will take.
PMIs are released monthly.
Central Banks’ Interest Rate Decisions
Central banks announce their monetary decisions regularly. For most developed economies, they release their statements every six weeks (e.g., United States, United Kingdom, Euro area), but some, such as the Reserve Bank of Australia, publish a statement every month.
Interest rate changes move the FX market as they directly impact a currency’s value. Hence, when central bankers speak, traders listen.
