Economic releases and impacts
Despite the fact that I view the markets in a technical perspective for pin-point trade entries, it is extremely vital to ensure that I am up to date with fundamental news, and most crucially when it will be released. It is crucial to stay away from entering into the market with knowledge of high impact news being announced due to the fact that market participants react predominantly from the consensus of economic releases and ultimately the actual data that is released.
Each week there are various economic releases, some modified and some unchanged. Market participants react to these releases by either buying, selling or hedging various asset classes. With this being said, financial markets can be quite volatile at times of economic releases, especially when the actual data release is either higher or lower than the predominant consensus. For instance, if we have knowledge that the Non-Farm Payrolls figures, following with the unemployment rate percentages will be released on Friday – as a beginner starting out, it is highly advisable to stay out of all trades which are Dollar linked currencies, securities and Gold also.
Hypothetically, let’s say that the Non-Farm unemployment figures consensus was 200K, meaning that the forecast indicates that there is 200,000 new employed individuals in the US, besides from workers on farms. Also, the consensus for the unemployment rate was 1.8%. With the actual being higher than the consensus indicates that the US job market is doing relatively well, which positively impacts US Government – meaning a stronger currency as a result. Subject to the differential in the forecast and the actual (if there is any) – market participants will react to this, creating a huge level of volatility on financial markets as a result.
Understand that financial markets are one big interconnected world. A stronger dollar leads to an increase in the US Dollar Index, invariably diminishing the purchase power of Euro against the Dollar and also a devaluation of Gold. There are various economic releases within a calendar month – some crucial, some irrelevant.
Below are the most crucial economic releases for all of the G10 economies..
Interest Rate Decisions = Variation of interest rate fluctuations for various nations
Non Farm Payrolls Unemployment Figures – Changes in Unemployment figure, excluding farms for the U.S.
Federal Reserve Chairman announcements (U.S Central Bank releases)
Quantitative Easing – Unconventional form of monetary policy with intentions to increase money supply.
GDP – (Growth Domestic Product) Measurement of a nation’s overall annually or quarterly economic activity
CPI – (Consumer Price Index) A specific measure that examines the weighted average of prices of consumer goods.
Retail Sales = A total measure of sales of retail goods either monthly, quarterly or annually.
There are also various other fundamental news announcements that can potentially affect the currency markets such as a change in certain commodity prices, new presidential elections and many more. A very significant economic modification that occurred which is not always changed was what we all witnessed in June, 2016 – Brexit.
Once it was officially announced that the UK and EU would be parting ways, market participants definitely reacted to this huge change – and in a very big way. We witnessed the GBPUSD exchange rate plummet in the end of Q2 2016 from £1 > $1.50 to £1 > $1.30 which is a 2,000 point decline. Conversely, this created an increase the exchange rate of EURGBP due to the inverse relationship they had at the time.
All in all, staying up to date with economic release dates and times are very crucial – understanding how to benefit from the modifications in each nation’s economies is what I go in depth on during the member’s forum, there is also key information in the member’s portal zone where I update key knowledge quite frequently.