Rookie traders must utilize an economic calendar forex in order to be informed of the numerous economic indicators, news events, and releases that shape the markets while trading forex. Learning which data to look for, deciphering what it means, and knowing how to trade it can offer traders an advantage and set them up for the long run.
GROSS DOMESTIC PRODUCT (GDP)
The Gross Domestic Product (GDP) is a key indicator of a country’s economic health. Each year, the central bank of the country issues predicted growth outlooks, which determine how fast the country should expand as measured by GDP.
Currency values tend to fall when GDP falls short of market expectations and to rise when GDP exceeds expectations. As a result, currency traders actively monitor the release of this number, which can be used to cautiously anticipate Central Bank decisions.
CENTRAL BANK RATE DECISION
The world’s numerous Central Banks meet every month to determine the interest rates for which they are accountable. They must decide whether to maintain current rates, raise rates, or cut rates. The outcome of this choice is critical for the economy’s currency and, as a result, for traders.
An increase in rates is generally considered bullish for the currency (meaning it will rise in value), while a decrease in rates is generally considered bearish for the currency (meaning it will fall in value), while a decision to remain unchanged depends on the economic outlook at the time.
The following policy statement, in which the Central Bank presents a summary of the economy and their prediction for the future, is just as important as the actual decision. This is also where monetary policy is announced, which includes important topics like the deployment of quantitative easing, a concept in economics.
CONSUMER PRICE INDEX (CPI)
Among the different economic indicators, the Consumer Price Index is the most generally used inflation gauge. The index reveals the historical average prices paid by consumers for a basket of market items, as well as whether the same goods are costing consumers more or less.
Central banks keep an eye on this data to assist them to establish interest rates and policies. Interest rate hikes are used to combat inflation when it is visible and rising beyond a specified objective.
Despite the importance of Central Bank meetings in many economies, the Federal Open Market Committee meeting in the United States takes center stage because the US Dollar is currently the world’s reserve currency.
The committee meets once a month to determine rates and make statements on current economic conditions and the effectiveness of an existing monetary policy, as well as to solicit forecasts for future economic conditions and monetary policy.
The rate of unemployment within the nation is essential to markets as well as to Central Banks as a pointer to the economy’s health. As Central Banks strive to balance inflation and growth, higher employment leads to higher interest rates, and as a result, this metric attracts a lot of market attention.
Trading technical chart patterns can be difficult, which is where having a thorough understanding of recent news events and economic data releases comes in handy. The above-mentioned compilation of the most relevant news releases and economic indicators to be aware of should assist you in your Forex trading.