What drives the forex markets? If we knew why currency prices move as they do,
our online currency trading would be much easier. The fact is that markets are driven by sentiment.
Sentiment being so subjective is very hard to gauge. But sentiment itself is driven by facts and those we can analyze. The facts we are talking about here are the economic news reports released by governments and other agencies on a regular basis.
Though most of todays spot currency transactions are speculative - i.e. the currencies are bought and sold on paper or computer screens and never actual change hands, the value of those currencies depends on the economic prospects for the respective countries.
Thus if the United States posts strong GDP growth, the effect is likely to be a surge in the value of the dollar, at least in the short term. For us retail traders, these short terms movements are out bread and butter.
So being able to interpret the effects on news releases on the forex markets can give us a vital edge in our trading. Knowing the details of these forex news releases in advance can also warn us of potential upcoming shocks in the markets. This can allow us to open, close or adjust our positions in readiness and not be taken by surprise.
So what are the major news releases we need to be interested in?
As mentioned above, the GDP (gross domestic product) figures are of key importance. They refer to the total volume of goods and services produced by a country and are a major indicator of economic health.
Unemployment statistics have a powerful affect on the markets. The most important of these are the non-farm payroll numbers issued on the first Friday of the month.
Then there are the retail sales reports. The better the economy, the more people buy so these figures offer a clear insight into the state of an economy.
Another important statistic is the consumer price index (CPI). This measures prices changes in consumer goods. Inflation figures are important for currencies because of the role of interest rates in controlling inflation and the effect of interest rates of currency values.
Remember that each country or economic zone has its own statistics. As currencies are traded in pairs, you'll need to be aware of reports from each country.
These are just a few of the many economic news reports. They're of vital importance but not easy to trade, especially for the new trader. For this reason, you need a guide. Check out
News Profiteer for all you need to know and successfully trade the forex markets using news releases.
