“australian Forex Events: Conferences And Expos For Networking And Profit Insights” – News trading has become increasingly popular among Forex traders because it offers opportunities to make large profits in a relatively short period of time. However, just as not all fingers are created equal, not all macroeconomic news has the same effect on the market. For example, the German Flash Manufacturing PMI will always have more impact on the Euro compared to the French Flash Manufacturing PMI. If you have an economic calendar open, you can already see which news is impacting the market and others you can easily ignore. For example, if you are trading the Australian dollar, you can easily ignore the readings of the Conference Board’s monthly leading index, as it will hardly move the price of AUD/USD or AUD/CAD, and even if it does, the movement is unlikely to change the prevailing trend. Compared to low impact news such as the CB Lead Index, the Australian unemployment rate or the overnight cash rate set by the Reserve Bank of Australia (RBA) will have a major impact on the AUD/USD exchange rate or any other currency pair that includes the Australian dollar. So, out of hundreds of news releases, how do you know which news events you should be following? The good news is that, just like the Pareto principle, only a handful of news releases are responsible for the majority of price movements for most currency pairs. Some of these news events are common to almost all currencies, and if you simply understand how they affect your favorite currency pair, you as a trader will be far ahead of most novice traders who only watch the chart. No. 1: Unemployment One of the main responsibilities of central banks around the world is to keep unemployment low. All the main monetary policy decisions made by any central bank are to keep it close to the unemployment or NAIRU inflation rate, which is not increasing. All major economies publish unemployment rate statistics every month and the lower it falls; the better the currency valuation becomes. Partly because when the unemployment rate falls below the NAIRU, which is always close to 4.0%, central banks start raising interest rates to reduce inflation and cool the economy. These expectations of higher inflation and higher interest rates are closely related to low unemployment. Thus, the unemployment rate is a key indicator of future monetary policy decisions. Figure 1. Unemployment in the UK and the European Union Unemployment is currently much higher in the EU than in the UK. Thus, a simple analysis would suggest that the value of the Euro would be higher than the British Pound (EUR/GBP). If you see a consensus forecast that unemployment will fall in the European Union next month but remain unchanged in the UK, you can see this as bullish news for EUR/GBP. #2: Gross Domestic Product (GDP) Growth Rate Gross Domestic Product (GDP) is like the scorecard of a game. It measures the general state of the economy and the higher the GDP growth rate, the stronger the currency would be. If you’re trading GBP/USD, you can easily see which way the pair will move in the coming weeks by simply keeping an eye on US and UK GDP growth. Figure 2: US and UK GDP growth rate In Figure 2, you can see that the US GDP growth rate is generally close to the UK GDP growth rate. However, they often overtake each other. If you see that the US GDP growth rate is higher than the UK growth rate, you can interpret this as a bearish signal for GBP/USD. Likewise, if you see a forecast that New Zealand’s GDP growth will slow compared to the UK’s, that would be a bullish signal for GBP/NZD. Figure 3. The release of GDP data causes sudden price increases #3: Consumer Price Index (CPI) The Consumer Price Index (CPI) measures the level of inflation in an economy compared to a base year. You don’t have to be an economist to understand how inflation affects a set of currency pairs, but some basic knowledge will help you go the extra mile. You see, most central banks have a monetary policy that tries to limit the rate of inflation to a certain predetermined range. When inflation exceeds this range, central banks usually raise interest rates to contain inflation. Most central banks try to limit inflation to 2.0% and use CPI to measure it. However, the US central bank, the Federal Reserve System, uses the Personal Consumption Expenditure Index instead of the CPI. So if you trade the US dollar and want to predict the future interest rate landscape, use the PCE index. However, whenever you see a rising CPI forecast, that would be bullish news for the currency. For example, if UK CPI forecast for the quarter is 2.5%, but Australian CPI remains at 1.5%, then this will affect GBP/AUD. #4: Overnight Interest Rate You see, banks also borrow money from each other, but they do it overnight. Central banks try to influence the overnight rate by lending to the money market at their overnight rate, an important tool in their monetary policy arsenal. The overnight interest rate is the main reason why prices fluctuate in the market because it also affects the swap rate. In fact, many traders think that the main purpose of fundamental analysis is to predict the future interest rates of the major central banks. Although understanding monetary policy is difficult even for veteran economists, the interpretation of this news is quite simple. If you see a forecast that says the Federal Reserve is likely to raise the overnight rate, that’s likely to affect the US dollar. So, for example, if the Bank of Japan does not change its rate, it will be cool news for USD/JPY. 5. US Non-Farm Payrolls (NFP) Non-farm payrolls show the number of additional jobs added in the previous month in corporate America, an important indicator of the overall employment situation in the country. Figure 4. Impact of Non-Farm Wage Data on EUR/USD The US dollar is the world’s de facto reserve currency, and the US Bureau of Labor Statistics (BLS) typically releases non-farm payroll data on the first Friday of each month. ). While not every economy has an equivalent data release, you should definitely keep an eye on US NFP as it will ultimately have a significant impact on almost all currency pairs linked to the US dollar. If you see that the NFP forecast is higher compared to last month, that is bullish news for the USD. So, for example, it will be bullish on USD/JPY and bearish on EUR/USD. #6: Organization of the Petroleum Exporting Countries (OPEC) OPEC is essentially a cartel at the international level. OPEC countries consist of about 15 major crude oil producing countries such as Saudi Arabia, Kuwait, Iran, etc. Currently, OPEC countries control about 44 percent of the world’s crude oil production, and their decision to increase or decrease crude production can be significant. impact on the global energy market. There is a strong correlation between the currency market and oil prices due to resource allocation. Thus, it can affect the balance of trade (BOT) and affect the psychology of the market. Because of this effect on oil prices, OPEC decisions can affect the currency market as it affects production on a global scale and as Forex traders you need to keep an eye on what OPEC is doing. You see, crude oil is quoted in US dollars because it is the de facto reserve currency. Thus, the price of crude oil will affect any national currency in a country that has large reserves of crude oil. In addition, the low price of energy means that consumers will be left with more disposable income, which can create demand for goods and services, boosting sales. Thus, when OPEC increases production, it tends to increase GDP growth in the US, which has large oil reserves. But this may not have a significant impact on the Japanese yen, as Japan does not have large oil reserves. In this scenario, USD/JPY will rise as oil production cuts will be positive news for the US dollar. Although it is difficult to analyze what the effect of the price of oil would be on a particular currency, knowing and understanding the effect by reading detailed analysis can help you feel the pulse of the market and improve your trading.
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