There are multiple factors that move prices in the forex market and one of the major factors among those is the international news. The global events are the real force that impacts the foreign exchange rates because there are international currencies involved and the price difference occurs between them is in relation to each other as they are connected, so any piece of news release or event from one country will impact not only their currency’s prices but in relation to that other countries’ currencies will also experience a rise or fall.
Any type of international news can impact the forex market depending on its intensity. Why does news impact the currency rates? It is because news is a piece of information that makes the investor’s perception and when all investors in the forex market, including big players and institutions collectively, form a decision based on a piece of news, that usually ends up in market volatility and price fluctuations. Especially news related to economic data, speeches from world leaders, and geopolitical events strongly indicates the strength of a country’s economy that results in being able to predict a more accurate future for the currency’s value of the said country in the forex market.
The impact of news goes something like this, there is news that comes unexpectedly causing major price changes in the forex market, then there is news related to economic releases, reports, and global financial events that are scheduled in advance. Those are the news that can be used in favor of a forex investor. There are two types of impacts of the news; an initial response is an impact for a short period of time causing the market to act extremely volatile, then the second reaction is for the long term when the market has calmed down and investors have understood the real impact of the news or event on the present market.
As you already know that forex trading is all about predicting the price direction, if there is unexpected news you cannot do anything but just go with the flow even facing some loss. However, if you know in advance that there is an upcoming event that will impact the price movements in the market, it would give you time to better prepare yourself to deal with any situation. There are analysts, strategists, experts, and experienced economists that also predict what kind of an impact the news will have that gives you more information that can help you plan your trades. But even just knowing that something is going to happen is enough to come up with strategies to protect yourself before the storm hits.
In the end, we would like to share the news that impacts the forex market and one should monitor while trading:
- Central Bank policies
- Monetary policies
- Fiscal policies
- Inflation rates
- Interest rates
- Employment rates
- Trade balances
- Gross Domestic Product (GDP) figures
- Economic data
- Speeches or tweets by world leaders