Spotting News in Forex

Some forex traders look to trade the news in the foreign exchange markets. In staying on top of key events and happenings, a forex trader can make money from fundamental factors that affect the currency markets.

Each month, there are literally hundreds of notable news releases about the status of the economy, capital flows, international trade, and other important events. These news releases usually come with hot and heavy trading, as forex traders pile into the market to predict how the numbers will move currencies.

The most important news items are:

• Employment reports
• Economic forecasts and readings
• Central bank activity in the market

These news items are typically released by world governments and investment research facilities. You’ll find that each country has its own economic release schedule. On any day, there may be hundreds of items that forex traders can read to gain insight about the economies behind the currency. But not all of this material is actionable.

The Biggest Market Movers

We explained in an earlier lesson that the US dollar is the leading currency around the world. It makes up a majority of forex holdings, as well as volume, and is a very important “reserve currency” for other governments.

Naturally, with so much emphasis on the dollar, the biggest news pieces are those that concern the dollar. In order of their importance, here are the market movers:

1. Non-Farm Payroll report (NFP)
2. Retail Sales
3. International Trade Reports
4. Central Bank thoughts and activity (the Federal Reserve)
5. Inflation reports (the Consumer Price Index)

These five items make the market move, and make it move quickly! In future lessons, we dissect each report for its influence on the market, but for now, we’ll focus on the fact that they exist.

In the next article, we’ll talk about how traders play the fundamental news in the foreign exchange market.