Forex traders should familiarize themselves with the key event risks that heavily impact the main currencies.
Remember that we are trading the news due to its ability to extend volatility within the short-term, so naturally, we might wish to only trade news that has the simplest market-moving potential for the currency market.
The news that tends to drive price action and produce volatility usually involves:
- Changes in central bank policy (“monetary policy”)
- Shifts in government policy (“fiscal policy“)
- Unexpected results in economic data releases
- Random tweets from a particular world leader who likes to place his name on tall buildings
Being conscious of upcoming key event risks can help avoid being on the incorrect side of the market.
If you spend a while exploring the Economic Calendar, you’ll start to note that the foremost important events usually relate to changes in interest rates, inflation, and economic process , like retail sales, manufacturing, and consumer sentiment.
Here are some examples:
- Interest rate decisions by central banks
- Inflation (CPI, PCE, PPI)
- Employment data (unemployment, wage growth)
- Economic growth (GDP)
- Retail sales
- Industrial production
- Business sentiment surveys
- Manufacturing sector surveys
- Consumer confidence surveys
- Housing data (sales, construction)
- Trade balance
Different countries may use different names for similar data but we attempt to point that call at the Economic Calendar.
Depending on what is currently happening within the world, the relative importance of this event may change.