How Forex News Affects Market Trading

Jul 10 • Forex Trading Articles • 1516 Views • Comments Off on How Forex News Affects Market Trading

Never underestimate the power of the media. Just like in any case, the news, specifically, forex news deeply affects financial markets worldwide. Any foreign exchange expert knows how interrelated these factors are and how simple news can strongly influence macro- and microeconomic statistics as well as other financial forces.

Any kind of financial news, especially the major ones can shape the world’s economic future. The rates of the currency and the direction of growth can easily be stabilized or toppled by local and international geo-political events as well as other essential statistical intelligence reports. Saying that news on foreign exchange “shapes” the course of market trading can be a little bit abstract but looking at the following key illustrations will help anyone, beginners even, how forex news essentially sways the market forces:
 

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  • Monetary events: When government decisions on policies connected to monetary issues done through their central banks are announced and executed, inevitably, there are expected and instant shifts and effects on pairs of currencies. The word instant can even be considered as an understatement. In reality, the effect of such forex news is even faster than light’s speed.  For example, in 2007, rate hike announcement by the United States Federal Reserve’s Federal Open Market Committee (FOMC) has propelled the Euro-US Dollar currency pair upwards.
  • Macroeconomic reports: Macroeconomic press release and reports are another classification of very important forex news that any trader, expert or neophyte, should be watching out for. It has a very huge impact to the rates of each currency. One of the most common examples is the national Gross Domestic Product (GDP) reports by any nation. Fluctuations can be the ultimate result of unforeseen figures presented in any macroeconomic press releases and reports of any sort. If the announcement in connection with a report is something positive, it makes the currency more attractive; thus, it acquires more value and more traders want to get involved. Otherwise, traders flee away from a currency that is not performing well based on macroeconomic measurements.
  • Geopolitical actions: The third major classification of forex news that can change the economic tide is called geopolitical actions or events. These geopolitical actions and events may include, but should not be limited to the following examples: scandals wherein political leaders are involved, political exercises like elections, declaration of war, announcement of nuclear bomb tests, terrorist threats and attacks, and peace talks commonly end up with lasting effects in the economic factors that are ultimately reflected in the trading market. One of the most memorable geopolitical events that occurred in the past is the 9/11 attacks and bombing that did not only leave the rest of the world in awe, it also left the global economy scarred for life.

Indeed, no one in the forex trading business should ignore the news. Forex news, therefore, does not only include those that are directly related to economics and business. Most of the time, anything significant that occurs anywhere around the world has an indirect influence to the behavior of the market forces.

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