How Does Forex News Trading Work?

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When it comes to fundamental trading, major shifts in prices can often occur because of an unexpected news event or because expectations of news events are not met. Some forex-related news can affect the market as a whole while some will affect certain currencies in particular.

Economic data tends to be one of the most important catalysts for short-term movements in any market, but this is particularly true in the currency market, which responds to news from around the world. Typically, employment reports, interest rate decisions, and GDP numbers are what is considered important news for a country’s currency. These news are important because they can affect monetary decisions by central banks. If the data paint a picture of a strong economy for example, central banks will likely opt to raise interest rates which in turn typically causes their currency to rally.

Which are the world’s most traded pairs?
Based on global trading volumes the most liquid currency pairs are the following:
1. EUR/USD
2. USD/JPY
3. AUD/USD
4. GBP/JPY
5. EUR/CHF
6. CHF/JPY

Which news and data releases impact the forex markets the most?
Since the U.S. dollar is on the “other side” of 90% of all currency trades, U.S. economic releases tend to have the most pronounced impact on the market. It should be noted however that trading the news is more complicated than it may sound. Forex pairs can be affected by a number of different releases so predicting price direction is always speculative. Not only is the reported consensus figure important, but so are the forecasts and the revisions. That being said, news and data releases can provide some clues as to how the markets will behave but they should not be considered absolute.

What are the key releases?
When trading the news,a trader needs to know which releases are actually expected that week. BDSwiss provides its traders with a complete Economic Calendar of the world’s biggest financial announcements will take place as well as what the projected value will be. Traders are also given the ability to filter your results based on date, country and/or importance.

Generally speaking however, these are the most important economic releases for any country:

1. Interest rate decision
2. Retail sales
3. Inflation (consumer price or producer price)
4. Unemployment
5. Industrial production
6. Business sentiment surveys
7. Consumer confidence surveys
8. Trade balance
9. Manufacturing sector surveys

Sources: Investopedia, FXStreet

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