The Forex Market is affected by a whole host of global news events. The market will respond to these news events differently so some knowledge of how the currency pairs trade will help any trader better digest the news and make trading decisions based on them. So what types of news will influence the Forex market?
Geopolitical news has an important influence on currency pairs. Geopolitical events such as wars, political instability and elections are only some of the news that will move the market Even if you are a strictly rules based technical trader you should at the very least keep any eye out for any geopolitical events that could influence the current state of the currency pair you are trading.
Governments can have tremendous influence in the Forex market. The biggest influence comes in the form of a central banks change in monetary policy. Central banks have a responsibility to watch inflation levels and make changes accordingly. Central banks make their changes and exert their most influence in the form of changing interest rate levels. Interest rate changes rarely come as a surprise to any market so you may be wondering why they would matter. A central bank that changes interest rates by more than or less than a projected amount will greatly influence the currency pair.
Macroeconomic news will come in the form of data that is collected about the state of a nation’s economy. Reports such as unemployment rates and changes in GDP are only a few of the types of reports that a country will release regarding the health of its economy. Macroeconomic news can exert a great deal of influence on a currency pair. Keep in mind also that we are in a global economy so while indeed the GDP numbers of Switzerland may only impact a smaller number of pairs, meanwhile the macroeconomic news of the US can exert a great deal of influence on many currency pairs.
While these news events are not all equal and their influence is not all the same it would be folly to ignore their effect on the Forex market. No matter what type of trader you are, keeping an eye on the news events is a good idea.