We all know that the forex market is one of the fastest moving markets in the world. Making sure you are aware of everything happening that might affect your trading decisions is vital to the success of your trading activity.
We have therefore gathered all the major events, to make sure that all new and experienced traders are up to date with the various news, events as well as economic indicators that are being released daily and shape your trading decisions. The ability to understand which data to look at when trading is what will give you as an fx trader the edge you‘ve been looking for.
Understanding technical charts and patterns could prove quite challenging and that is why comprehending economic data and news will come in handy. Here's a list of the top 5 economic indicators and news you‘ll need to know.
No.1 Gross Domestic Product (or commonly referred to as GDP)
GDP is one of the most important financial indicators, as it refers to a countries economic health. The central bank of any country is expected to publish their economic growth outlooks every year which will inturn indicate the speed at which the country is growing.
No.2 Indicators referring to employment
Looking at the unemployment rate of a country is vital as to central banks it represents the economic health of a country. Employment or unemployment rates will determine interest rates as Central Banks will use the interest rates to balance the inflation rate. In addition to the unemployment rate, other indicators to take into account would be the NFP and US ADP figures which are released every month.
No.3 Central Bank rate decisions
Having mentioned Central banks a couple of times in this article, we are sure you‘ve understood the importance of the world's central banks and how much they influence the equity and forex markets.
They don't only act independently though. The world’s banks meet monthly to discuss and decide their interest rate decisions. In these meetings they discuss whether they will increase or lower the interest rates and the outcome of these conversations is vital to the value of their currencies and as such to the fx traders themselves.
Increasing the rates will most probably be seen as a bullish trend (which translates to the expectation that the currency will increase in value)
Decreasing the rate will have the opposite effect, a bearish trend (which will translate to the expectation that the currency will decrease in value).
No.4 Consumer Price Index (Commonly referred to as CPI)
CPI is the most commonly used indicator to measure the inflation rate of any country. The indicator sheds light on the historical average prices the consumers have paid for a basket of products and reflects on whether the same products cost more or less in todays market.
Once again, central banks come into play as they monitor the CPI index which will inturn help them define their policy and rate setting.
No.5 FOMC Meetings
This refers to the US Federal Open Market Committee meetings. Whilst all Central banks are important the FOMC meetings are particularly important as the USD is at the moment the world's reserve currency.
Every month during the FOMC meeting the rates are set and the committee is also looking at the current economic situation as well as how effective the monetary policy is, which will in turn prove useful in defining the expectations and forecasts of the economic conditions that will come as well as the future monetary policy.
It is important that all traders follow the aforementioned indicators, and use them when making trading decisions as they will help them understand what the market expects and therefore react to the market conditions on time ensuring that they have identified trading opportunities in forex trading.
