What is High Impact Forex News?
High Impact Forex News are those headlines that can cause a significant volatility in the forex market. It usually refers to those events, reports, and statements which can lead to a significant move in the forex market and may likely affect the stock prices of an economy’s companies. These news can create a ripple effect across the global market causing a significant move in both up and down direction. Currency traders usually keep an eye on these news to analyze the potential risk and markets’ sentiment before taking their trading decisions.
Forex News with Highest Impact
When it comes to forex news, some events have higher impacts than the others. If we consider economic news, then the two most important news that can have highest impact on the forex market are the release of interest rate decisions of central banks and employment reports. In addition, when it comes to political developments, then the election results of any major country, economic surveys, and sanctions are the ones which can lead to significant volatility in the currency markets.
Essential Statistics of High Impact Economic Forex News
Generally, traders and investors track economic figures such as inflation rate, GDP growth, Retail Sales, balance of payments, and current account deficits. All of these figures are closely watched by market analysts and central banks that set monetary policy. In addition to these economic statistics, traders also should familiarize themselves with the key event risks that heavily impact the major currencies in the forex markets. Knowing which economic reports have the highest impact, and how they are likely to impact the currency markets is important for traders and investors alike.
Overall, high impact forex news should be taken into account for making successful trading decisions. These events can cause sudden volatility in the currency markets which can prove beneficial or damaging to traders regardless of their trading strategies. As such, it is important for forex traders to stay informed of the latest news and events to determine the right trading decisions for the desired financial goals.
Overview of High Impact Forex News Reports
It’s essential for forex traders to understand and evaluate the high impact news that can influence the market. Many traders use a mixture of fundamental and technical analysis to assess the health of the forex market, and keep up to date with current economic news. This guide breaks down 10 of the most important economic news releases of the year, their likely influence on forex trading, and why understanding them is so important for informed and successful market analysis.
Gross Domestic Product (GDP)
GDP is a key indicator of the overall economic health of a country. It’s calculated as the amount of goods and services produced by the economy over a certain period of time, usually quarterly or annually. A rise in GDP indicates that the local economy is growing, while a fall informs traders of a weakening economy. Typically, for foreign exchange dealers, a growing economy helps strengthen the local currency, while a declining one is a bearish indicator.
Nonfarm Payrolls (NFP)
The Nonfarm Payroll number is one of the key indicators used by traders to gauge economic performance and project future conditions. The data released monthly provides an understanding of the overall labour market in the US, and helps inform decisions on the rate of interest. As most of the world’s biggest economies are based in the US, influential changes in NFP can have a knock-on effect on other markets. Forex traders should track performance against the group figures, and take into account breaking news and proposed changes to the NFP.
Retail Sales
Retail sales data, released monthly, provide an insight into the spending trends of a consumers. They are a lagging indicator, as unemployment, wages and consumer sentiment can all have an effect on these figures. They give an insight into the confidence of the consumer, and if the numbers rise consistently, this usually indicates that the economy is doing well. An increase in retail sales data often signals a positive outlook for future growth in the economy, and this often boosts the local currency.
Manufacturing PMI
The Purchasing Managers’ Index (PMI) is another key measure of economic health. PMI is calculated using survey data from different areas participation in the manufacturing sector. A figure above 50 indicates growth in the sector, while 50 or below signals contraction. PMI data can assist traders in predicting future changes in the economy, as it can indicate potential rises in inflation, manufacturing and also production.
Consumer Price Index (CPI)
The Consumer Price Index (CPI) is a key measure of inflation, and is used to judge changes in the cost of living. The index is used to assess changes in the cost of the things consumers buy most often, such as food, clothing, medical care and transportation. It’s also used to assess the real rate of interest, and the trend of this data will alert traders to any impending dips in the value of a currency.
Employment Cost Index (ECI)
An understanding of the Employment Cost Index (ECI) helps traders assess customer purchasing power and its effect on inflation. Much like the CPI, the ECI is used to measure inflation, however, instead of checking the retail prices, it focuses on the costs of labour in the economy. If employers have to pay more, this cost will be transferred on to consumers. The ECI will provide traders with a comprehensive assessment of the prevailing trend in the cost of hire.
Business Confidence Indices
Business Confidence Indices, released monthly in the form of surveys, measure how industry leaders perceive the current economic conditions. It provides an insight into how firms are managing risk, and plan to approach commercial activities. It’s also an important measure of consumer sentiment, as the survey will usually ask businesses about their opinions of the current and potential future economic conditions. A healthy Business Confidence Index is usually an indication of looming economic growth, and can help traders form a better idea of trend directions.
Interest Rate Decisions
Interest rate decisions are typically made by a central bank and, when they change, can alter overall market sentiment. If the rate is increased, this usually helps to strengthen a currency, as higher interest rates will attract more investor’s money to that particular country or region. It also allows access to better products such as saving accounts and deposits. If the rate is decreased, this will generally weaken a currency, as it incentivises investors to look for new potential investments with a higher yield.
Balance of Trade
The Balance of Trade is derived from the difference between exports and imports. If a country has a higher number of exports, this will indicate a healthy balance of trade and the currency will be strengthened. Similarly, if there is a consistent lower number of imports than exports, it reflects a healthier overall balance and can help strengthen currency performance. Surpluses and deficits are usually measured against market prediction, and provide a valuable snapshot of economics performance to traders.
Consumer Confidence Surveys
Consumer Confidence Surveys are conducted by research institutes such as GFK, and allows traders to better assess the current economic landscape. The survey takes into account consumer sentiment for the current economy and future prospects, and this often reflects in currency performance. Results are usually determined by a point system, and offer an assessment of the expected business and consumer outlook. If the index rises far above the forecast, this often helps build a strong performance for the currency in the next period.
By keeping up to date with the key economic releases is essential for informed forex trading. It’s important for traders to develop a sound understanding of the currency markets, and have an awareness of the events that can move the markets. Now you have a better understanding of some of the most important economic events and indicators, you are well equipped to making informed decisions on the foreign exchange market.
