When you trade the forex market, you have to know about critical FX news from all around the world. The world is huge, though, so you’re going to need to narrow down your search to these 5 FX news events:
Central bank announcements
Every country’s central bank is responsible for setting the most important fiscal policies that affect the value of their country’s currency. As forex traders, such information is critical as it helps us determine the possible strength of a certain currency in the future. For this reason, announcements from any central bank are closely monitored for any changes in fiscal policies. Besides any direct changes, clues of possible future changes are also noted either as dovish or hawkish, also to help in predicting long-term strength.
Even though announcements by any central bank are important, there are certain countries’ central bank officials who cause a bigger impact on the markets. These include statements from the FED (Federal Reserve), BoE (Bank of England), ECB (European Central Bank), BoJ (Bank of Japan), RBA (Reserve Bank of Australia), and other emerging economies like the (PBoC) People’s Bank of China and the RBI (Reserve Bank of India).
Since these are the world’s major economies, central bank announcements from them have a major impact. Nevertheless, there are plenty of currency pair crosses, and you should check for the central bank announcement of the currency you are interested in. most central banks make their announcements about 10 times a year.
Even though politics ought to be separate from the economy, they are usually entwined. That is why the central bank is kept as a separate institution from the government. Nevertheless, political decisions will always affect the economy in one way or another, which is why news about political events is crucial in Forex trading. For example, the Brexit vote last year and the US general elections both had a huge impact on their countries’ currencies.
Besides the big stuff like elections, even minor adjustments also play a part. Take, for example, South Africa’s rand reaction to the sacking of then finance minister Pravin Gordhan. Therefore, always stay updated with the political shifts in every country whose currency you’re considering trading.
Bond performance data
Governments issue bonds in order to increase government spending, and thereby, cash flow within their borders. These bonds have an annual payout indicated by a percentage figure, and the buyers earn from this. Once a person owns a bond, they can subsequently float it on the open market where other buyers can buy them as well. When investors are confident in a country’s economic performance, they are willing to pay more for them on the open market, and their performance rises.
Therefore, when a country’s bond performance increases, it shows increased trust in that country’s economy and, subsequently, its currency. So, by observing the performance of a country’s bonds, you can tell how major investors are feeling about that country’s currency, and trade according to this perception. Bond performance figures are announced by the central bank, although separate from the interest rate decisions.
Economic performance indices
This is the data conducted by surveyors on the ground to keep track of various aspects of the economy. For example, the CPI (consumer price index) is done by analyzing the price of common household goods and services to measure inflation. Other reports will measure the performance of the housing and industrial industries to determine how businesses are performing. There are a multitude of other such data announced in the FX news calendar, and all of them are important for a trader as they help guide you on the performance of a certain currency.
Natural disasters and the stock market
Natural disasters can cripple a country’s economy, if they are serious enough, but even smaller disasters can make a dent. Any such news is important when you’re trading the forex market. Stock market moves are also important because they reflect the attitude of investors on a country’s economy. When stock markets underperform, especially the stock indices, chances are the currency too is going down.