When you just happen to be looking at a currency pair chart and you suddenly see an abnormal movement, this usually means that there was a news release.
Any currency in the world is affected by several different news. They can be either political, social, economic, among others. The fact is that a country’s currency is affected directly by the different financial news.
This is why it is so important for Forex traders to be aware of the different economic indicators as well as of the different news events that may come out during the day or week.
Here are the 5 market news events that usually increase the Forex market volatility:
#1: Central Bank Rate Decision:
Every single month, each Central Bank meet to decide whether they will maintain, increase or decrease the interest rates. While an increase of the interest rate usually gives a bullish sign for the currency, a decrease of the interest rate gives a bearish signal and it should decrease in value
But the announcement of the new interest rate is much more than that. This is when the Central Bank of each country provides a general overview of the economy as well as their vision for the future. Now, depending on how traders and investors interpret their words, the currency can either go up or down.
The GDP is one of the most important indicators that measure the health of a country’s economy. So, when the GDP report is below the market expectations, the currency tends to fall; when the GDP is above expectations, the currency is likely to rise.
#3: CPI (Inflation Data):
The CPI (Consumer Price Index) is the most widely used indicator in terms of inflation. Usually, when inflation is seen as moving beyond a determined target, interest rates will tend to rise because they are used to counter inflation.
#4: Unemployment Rate:
A country’s unemployment rate is one of the most crucial data for the market since it refers to the economy’s health. Usually, higher employment rates tend to lead interest rates to rise.
#5: FOMC Meeting:
In the world economy, all countries are equally important. However, if there are any financial news that only concern to a country that tends to affect all the economies all over the world, this country is the United States of America. So, when there is the FOMC meeting, which happens once a month, the rates are set. Plus, there are also the speeches about how the economy is, what’s good, what’s bad, and what suggestions the FOMC has.
Author: Editorial staff of 70trades reviews blog