community forex traders Always keep up to date with international news and published schedule of developed country economic data. News and information are known to fundamentally influence the movements of exchange rates in the currency market. However, do you know which fundamental news is the most influential and which forex traders need to pay attention to?
You may have heard of popular fundamental news such as the US Federal Reserve (Fed) interest rate announcement and Non-Agricultural Sector (NFP)But the most influential variety of fundamental news stories isn’t just these two. The fundamental news that affects each currency pair varies depending on the country of origin of the currency.
at least Traders must have knowledge of seven (7). forex basic news It is important to avoid confusion: interest rate announcements, gross domestic product (GDP), consumer price index (CPI), retail sales, employment and unemployment, industrial production and production, and trade balance. Here’s a full description of each story.
- interest rate announcement
Federal Reserve interest rate announcements always apply to all major currency pairs as well as the exchange rates of developing countries such as the Rupiah. Therefore, forex traders will always keep an eye on the Federal Reserve’s meeting schedule and announcements. a reserve known as the Federal Open Market Committee (FOMC).
The FOMC meets eight times a year. Top Federal Reserve officials discuss the current state of the United States. and world economy It then decides whether a change in interest rate policy is necessary to respond to these economic conditions. In a post-meeting statement, the FOMC could announce a fixed rate, lower or higher if interest rates were raised. The US dollar will strengthen. meanwhile If interest rates drop The US dollar will depreciate.
In addition to the US Federal Reserve Central banks of other countries It also holds regular policy meetings, including Bank of Japan (BoJ), European Central Bank (ECB), Bank of England (BoE), Swiss National Bank (SNB), Bank of Canada (BoC), Reserve Bank of New. Zealand (RBNZ) and Reserve Bank of Australia (RBA). The decisions made at the meeting will affect the currencies associated with the respective central banks.
- Gross Domestic Product (GDP)
Quarterly GDP disclosures include the fundamental news that has the most influence on currency exchange rates. Why is that? As GDP increased the total value of the goods and services produced by the economy in the previous quarter, the data thus shows how the overall economy is.
Traders tend to ignore the stated GDP data, but instead focus on GDP growth over time. The ideal GDP growth is not only higher than the previous period. But it also meets market expectations. If the country’s GDP growth exceeds expectations The currency exchange rate will strengthen. meanwhile If GDP growth is lower than expected The exchange rate will weaken.
- Consumer Price Index (CPI)
The Consumer Price Index report is mainly used to measure inflation or deflation. Inflation is a continuous increase in the prices of goods and services over a period of time in a region. While deflation is the opposite condition, i.e. a drop in prices, CPI data is usually published monthly.
Measuring the impact of CPI data on the Forex market can be tricky. This is because inflation is expected to meet the central bank’s different targets. An inflation rate that is too low or too high will have a negative effect on the currency exchange rate. to understand the impact of this information. Traders need to know the inflation targets of each central bank.
Currently, the Federal Reserve, ECB, BoJ, BoE, BoC have targeted inflation of 2 percent, RBA targets in the range of 2-3 percent, while RBNZ targets between 1-3 percent. Banks of Indonesia set different interest rate targets everywhere. year Usually between 3-4 percent, with a standard deviation of 1 percent.
- retail sales
Retail sales data collects the number of products sold in stores across the country. whether it is a bookstore hypermarket mall grocery storeand so on. The data is usually published monthly. However, the volatility is very high. Especially in the times leading up to and after holidays such as Christmas, New Year, Chinese New Year and Eid al-Fitr.
All major currencies will be affected by US retail sales data. UK retail sales data will also have a high impact. Because the country’s economy is a consumer type (consumer driven countries).
- Employment and unemployment
This information is published monthly by the relevant authorities. The information gathered can cover a wide range of subjects. related to labor including the unemployment rate The number of new jobs created (employment), median income (average income), and labor force participation rates. Specifically for US employment data, there is also Non-farm Payroll (NFP) data, which shows the total number of employees employed in the previous month in all non-farm sectors.
All major currencies are affected by US employment and unemployment data, however, the exchange rates of other countries’ currencies are also influenced by employment data respectively. Why is that? because employment status is one of the economic drivers The more unemployment The lower the salary of employees The worse the country’s economic future, on the other hand, the better the labor absorption in the country. Employee salaries will be higher. The better the economic machine works.
- industrial production and manufacturing
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Industrial production and industrial production data show how well the country’s business activities are. Usually released every month If this information exceeds expectations This indicates that the economy is expanding and the exchange rate is strengthening. showing slower economic growth Therefore, the exchange rate tends to depreciate.
- trade balance data
The trade balance data captures a country’s total imports and total exports and is subtracted if more imports than exports. show a trade deficit At the same time, if exports are higher than imports, then there is a trade surplus. Excess conditions will support the appreciation of the currency exchange rate. But the deficit will weaken the currency exchange rate.
In addition to the balance of trade information There is also a balance in the current account. the difference is The current account covers not only exports and imports. It also includes inflows and outflows such as money transfers and foreign investments. three or six months Therefore, it does not affect the exchange rate much.
Here are the seven most influential fundamental news that forex traders need to pay attention to. However, traders should not focus solely on these scheduled news releases, periodic news such as elections, referendums, wars, virus outbreaks and so on. Similarly will change the fundamental valuation foreign exchange rate. stock market performance bond yield as well as the business and investment climate can stimulate the exchange rate to strengthen or weaken.