Forex trading involves a lot of analyzing. Currency movements can come out of nowhere, so it is essential to know the cause behind such movements. In this article, we are going to discuss the 4 Forex news events to watch out for, and how each affects the decision-making of Forex traders.
Central Bank Interest Rate Decision
A few of the world’s most influential central banks include the U.S. Federal Reserve, the European Central Bank, the Bank of Japan, and the Bank of England. These central banks meet each month to decide whether to raise, lower or leave its interest rates unchanged. Traders closely monitor their decision.
A decision to raise interest rates is seen as bullish for the currency. Meaning, it will rise in value. Whereas, a decision to lower interest rates is taken as bearish for the currency, which means it will decrease in value. When left unchanged, the currency may either be bullish or bearish.
Consumer Price Index (CPI)
The CPI, considered as one of the most important inflation-related economic indicators, gives information on the average prices consumers pay for a basket of market goods. The index helps determine if the cost of the same goods is more or less for consumers.
CPI data affects central banks’ monetary policy and interest rates, which have a direct impact on currency strength. Thus, Forex traders see it as a vital indicator. (Also see 4 Types of Forex Traders)
Gross Domestic Product (GDP)
GDP is the total value of goods and services produced in a certain country. When the GDP of a country falls below market expectations, currency value tends to decline. In contrast, when it exceeds market expectations, currency value tends to increase. Forex traders closely observe the GDP figure as it may be used to anticipate Central Bank movements.
Unemployment Rate
Forex traders also see unemployment rate as an important economic indicator. This is because Central Banks use this data to determine the health of an economy. When employment is higher, interest rate rises as they aim to balance inflation.
Bottomline
Understanding what moves the Forex market, as well as knowing how to react to Forex news releases help you create better trading opportunities. For new traders, this may be quite challenging and overwhelming. Learn more through this blog.
