Most traders understand that financial news has a significant impact on markets, but many don’t have a good understanding of where to find this news and what to expect from it. When trading, it is always best to be armed with the most current information before you open a position in foreign exchange markets.
What is the Economic Calendar?
This is where the Economic Calendar comes in handy for traders. Instead of searching the headlines of hundreds of different financial publications, a trader can use the Economic Calendar to see what financial news will be released and when.
Some of the information that we can track with the Economic Calendar are government reports on growth and trade, interest rate decisions, non-farm payroll unemployment rate data, and inflation reports. These reports affect real time market conditions and create market moving events.
Why is Economic Data Important for Traders?
Certain economic events and data will affect different markets and in different ways. Understanding the impact of this financial news can help a trader to definitely improve their trading results using fundamental analysis and better prepare them when they develop their trading strategies for independent financial success.
One example of how financial data can affect a market would be the release of GDP numbers from a country. For instance, when Canadian GDP numbers were better than expected, the Canadian dollar performed better in Forex markets against other currencies.
Another example of this would be profitability announcements from major oil companies, which are also in the Economic Calendar. In this case, good or bad news from oil majors can shift trading sentiment for Brent Oil. Secondary markets to oil can also be affected like any USD currency pair.
One last great example would be any economic news that indicates a coming recession for the U.S., major European country, or globally. In the event of this type of news, investors often will move their capital to Gold or even Bitcoin to help protect it from currency exchange losses. Recently, when the U.S. raised tariffs on China and the Yuan dropped in value, the price of Gold rose on the news.
How to Use the Economic Calendar
One of the great things about Economic Calendars is that you can customize them to focus on information that is most important to you and your trading strategies. Fortunately, Olymp Trade clients can access a free, customizable calendar to take advantage of this great tool.
Once you have the calendar on your screen, you can click on the “Filters” button to organize the information you want based on the country, type of data, and the level of importance of the data to be released.
You can also set the calendar for the current day, yesterday, or the future to see what type of information has been or will be released. This is a fantastic tool when trying to forecast market movements and take advantage of opportunities.
What are the Most Important Events to Watch for on the Economic Calendar?
There are four major pieces of information that have the broadest amount of impact on financial markets globally. Gross Domestic Product (GDP), Central Bank Interest Rates, Inflation Data, and Employment Data. Let’s explain each of these briefly to help give a good understanding as to why these would be important and why you should track them with the Economic Calendar.
GDP is the figure we use to understand if a country’s economy is growing or shrinking. Usually, every country see some growth, but how much is important. If China’s growth is outpacing Japan’s growth, that is important to the exchange rates of their respective currencies. In general, growth should be beating the country’s inflation.
Inflation and the Consumer Price Index (CPI) are ways to understand a country’s ability to purchase goods and services. If a country’s growth isn’t outpacing it’s prices, it is bad news for people in those countries.
Unemployment data lets us know if companies are hiring more workers or not. We usually compare it to previous data to see if an economy added more jobs, lost jobs, or had no change. This can often be a better indicator of how the economy is really doing as opposed to GDP. If people aren’t working, they can’t afford to buy new iPhones.
Interest Rate announcements from central banks. Most countries in the world have a central bank that determines the interest rate for banks in that country when loaning money to each other. Generally speaking, a lower interest rate is better for economic growth, but there are some exceptions.
The United States is the largest economy in the world not accounting for Purchase Power Parity (PPP) in which case China would be considered the largest.
Therefore, any of these four pieces of economic news that relate to the U.S. is going to have the largest impact on all markets. No offense to other countries, but the U.S. is the economic powerhouse in the world and drives many markets based on their consumer purchasing power.