Economic data releases are information sets that describe activities in an economy. Typically they are in a time series format that covers, weeks, months, quarters or yearly statistics. Each economic data release will have its own format for how often it is released and at what times but they typically are pre-scheduled and released at the same time each release.
Economic data releases are something that is very important when it comes to moving the Forex market. These are regularly published by government agencies and central banks around the world. Every day, stocks, bonds and currencies fluctuate in response to and the expectations of new economic information and the data produced by economic data releases. So, needless to say, they are a big deal!
Economic Data Primer
Professional traders and money managers spend a lot of their time researching economic data statistics because they provide crucial clues about financial markets and the potential future health of economies. They do this because fundamentals and economic indicators are what move the Forex market a good majority of the time.
In this article, we will refer to economic indicators, data sets, figures, releases, and economic news sets interchangeably throughout this lesson. They all describe the same thing. Different analysts will prefer to use one term over another to describe the same thing which is why we will use them interchangeably. We will look at some of the major economic figures that can and do have an impact on the prices of currency pairs in the Forex market because paying attention to these figures is very important as they will have an impact on your trading.
Some of this information might not be the most exciting right now but it’s all something that you will undoubtedly come across on a daily basis when you are trading in the Forex market. As with all things you will gain a much greater understanding of how these economic releases impact the markets by experiencing them in real-time.
The Importance of Globalization
It was once the case when traders would primarily concern themselves with United States based statistics because, at the time of this writing, the United States is the world’s largest economy and single superpower. However, with today’s globalization of financial markets and the reduction of trade barriers between most countries, this is no longer the absolute case. Globalization is a real thing and here to stay (for now) so traders need to make sure they are paying attention to economic data sets from the other key countries that belong to the currencies they are trading as well. This is particularly true for key currencies such as the Great British Pound, Euro, Japanese Yen, Swiss Franc and the Canadian, New Zealand, and Australian Dollars.
Of course, if a trader is interested in trading emerging currencies such as the Mexican Peso or some of the Scandinavian currencies then they will need to concern themselves with the indicators from those countries as well. The good news is that more and more people are jumping into those currencies so more information is becoming broadly available now.
How to know when Economic Data is Released
Almost all economic data and statistics are published at pre-set times during the month. This means that traders will know well ahead of time what data is coming out as long as they use an economic calendar ahead of time.
One of the best and most simple to use free economic calendars that is one of the most highly used by retail traders is from Forex Factory.
For the most part, traders will want to concern themselves with the data sets that have the impact coloured red. This is not always the case though; sometimes orange impact events will move the markets quite a lot and sometimes there will be red impact events that are not all that important.
For example, at the time of this writing, Forex Factory puts the weekly jobless claims out of the U.S. as a red impact event. However, we have found that this rarely moves the U.S. dollar because it is a “weekly” release and therefore this tends to be a very consistent number and well-known expectation. However, if the market is currently very focused on jobs data of if a central bank is overly concerned with jobs then it very well could deserve to be a red impact colour.
On the flip side, at the time of this writing, Forex Factory colours U.S. Core PCE as an orange impact but this happens to currently be the Fed’s main measure of inflation so it’s actually really important and can have quite an impact on the U.S. Dollar at times.
The main thing is that traders need to be in tune with the market and what the major theme is to understand the impact of any event at any given time. A yellow impact event could be the most important thing that will move prices if that is what the market is obsessing over at that particular moment.
What Traders Need to Know about Economic Data
As a trader there are a few important things they need to know about economic data:
- What data is coming out and when.
- What the market expectations are for that data.
- What the potential impact the release could have on the currencies that will be affected.
If a trader knows the above then they can start to form a bias for their trading.
The Expectations of Data is Critically Important
When talking about fundamental economic releases; what the market EXPECTS is, at the very least, as important, if not more important, than the actual headline number when it is released.
This expectation is very often one of the deciding factors as to which economic statistics are being viewed as significant at any given point in time. For example, if the market is paying close attention to a particular economic indicator then you know that it is likely to be important because traders only want to focus on what the vast majority of market participants are focused on. Traders also want to know why they are focussing on certain information.
The simple thing with all of this is that the market is going to be paying the most attention to what the central banks are saying that they are paying the most attention to. You can really make it that simple most of the time. Generally, if a central bank publicly states that they are heavily monitoring jobs data because they are very concerned with poor readings for example, then the rest of the professional market is going to focus with laser beam precision on jobs data! In this situation, traders probably don't care much about what housing data says because the central bank is not concerned either.
In this example, the market expectation around jobs data is going to create a lot of price movement before the jobs data is actually released. This is sometimes referred to as “trading into a risk event” using the market expectation and can be very valuable to a traders trading. What happens after the jobs data is released will largely be a product of unwinding the expectations based on the actual numbers that were released.
Economic Data and Economic Cycles
It’s important to view economic data developments in the context of trends and cycles. What does this mean? Please see our Wiki on Economic Cycles where we talk about:
- Inflation
- Hyperinflation
- Deflation
- Economic Cycles and the 4 Phases
- Economic Data and Economic Cycles
You can access the main Wiki on Economic Cycles HERE.
Indicators within the Economic Cycle
Economic Cycles and where we are within them will have a certain degree of impact on economic indicators. Because Economic Cycles are so important to how an economic indicator will perform we have an entire Wiki devoted to these cycles. In this Wiki on Indicators within the Economic Cycle, we will explore:
You can access the main Wiki on Indicators within the Economic Cycle Indicators within the Economic Cycle | HERE.
Economic Data Types
In this Wiki, we will explore the various types of economic data that most countries put out in the form of pre-scheduled news releases. We will look at what each of them means and why they are important for traders to know about. Specifically, we will look at:
- Gross Domestic Product
- Employment
- Unemployment
- Personal Income and Disposable Income
- Consumer and Personal Expenditure, Private Consumption
- Consumer Confidence
- Business Conditions: Indices and Surveys
- Inventory Data
- Industrial and Manufacturing Production
- Capacity Utilization
- Manufacturing Orders
- Motor Vehicles
- Construction Orders and Output
- Housing Starts, Completions, and Sales
- Retail Sales or Turnover, Orders and Stocks
- Wholesale Sales or Turnover, Orders with Stocks
- Imports of Goods and Services
- Exports of Goods and Services
- Trade Balance, Merchandise Trade Balance
- Export and Import Prices, Unit Values
- Producer and Wholesale Prices
- Surveys of Price Expectations
- Wages, Earnings, and Labour Costs
- Unit Labour Costs
- Consumer or Retail Prices
You can access the main Wiki on Economic Data Types HERE.
Specific Economic Indicators
In the following Wiki, we will explore Specific Economic Indicators, why they are important and what traders need to know about them so that they can navigate the Forex market better. Specifically we will explore:
- Overview of Economic Specific Indicators
- Trading with Specific Economic Indicators
- Growth Domestic Product Expanded
- Consumer Price Index (CPI)
- Non-Farm Payrolls (NFP)
- Average Hourly Earnings
- Unemployment Rate
- Trade Balance
- Current Account
- Producer Price Index (PPI)
- Industrial Production
- ISM Manufacturing Index
- Durable Goods Orders
- Housing Starts and Building Permits
- New Home Sales
- Consumer Confidence Index
- IFO Business Climate Survey
- GDT Price Index
- Crude Oil Inventory Numbers
- Economic Indicator Wrap Up
You can access the main Wiki for Specific Economic Indicators HERE.
Economic Indicator Pre-Trade Considerations
In the following Wiki we will take a look at some Economic Indicator Pre-Trade Considerations you should have before trading any type of news or data. It is essential to have a well thought out plan of action before trading around economic indicators and data. This is what we will explore in the Economic Indicator Pre-Trade Considerations Wiki.
You can access the main Wiki for Economic Indicator Pre-Trade Considerations HERE.
Related Wikis
Readers of Economic data releases also viewed: