The best news sources for a forex trader are probably Bloomberg and Reuters. These established media portals provide comprehensive updates on fundamental news that drives the forex markets.
Although these markets trade 24 hours a day, five days a week, the largest moves typically occur on news releases. As central banks and other government agencies provide updates on the state of their economies, institutions, and retail traders scramble to reposition their currency holdings.
This volatility can create opportunities but also present dangers—thus, knowing what these news are and when to expect them becomes vital information for every forex trader.
Fundamental Analysis and Forex Trading
Fundamental analysis is a cornerstone aspect of forex trading. It involves evaluating the economic, social, and political forces that influence the supply and demand for currencies. Unlike technical analysis, which focuses on price patterns and market behavior, fundamental analysis seeks to understand the underlying reasons for currency movements.
Even traders who only trade short-term technical moves must respect the fundamental news. These traders often wait until the news releases have been digested by the market, thus utilizing fundamentals in their own way.
Economic news has a significant impact on currency values. For instance, a positive economic report, such as strong GDP growth, can lead to an appreciation of a country's currency, increasing its value against its peers. Conversely, negative news, such as high unemployment or political instability, can lead to currency depreciation.
What Are Key Economic Indicators?
The following three economic indicators are the main drivers behind the forex markets.
- Interest Rates: Interest rates, set by central banks, are a critical factor in currency valuation. They dictate the cost of borrowing money and create opportunities such as carry trade—a situation when borrowing a currency with a low interest rate to purchase a currency with a high interest rate. Higher interest rates offer better returns on investments in that currency, attracting foreign capital and increasing demand. Lower interest rates have the opposite effect.
- GDP (Gross Domestic Product): GDP measures the total value of all goods and services produced within a country over a specific period. It is a primary indicator of a country's economic health. A growing GDP indicates a healthy economy, which can attract foreign investment and increase demand for the country's currency. A modern take on GDP includes a “green GDP” coined by a Chinese economist, Niu Wenyuan, who measures GDP by deducing the environmental costs.
- Unemployment Data: The unemployment rate indicates the percentage of the jobless labor force and actively seeking employment. High unemployment can signal economic distress, leading to a weaker currency. Conversely, low unemployment often correlates with economic strength. Employment has long been one of the leading recession indicators, with economists claiming that rising unemployment precedes recessions – also known as the “Sahm rule.”
Financial News Websites
Financial news websites can be a great source of forex market news – especially for expert commentary and interpretation. Still, taking the market commentary with a grain of salt is advised. The following three websites provide comprehensive coverage of forex markets.
- Bloomberg: Bloomberg is a leading source of financial news, data, and analysis. It offers real-time updates on economic indicators, market trends, and central bank decisions, making it invaluable for forex traders. Bloomberg’s FX Center is a valuable source of updates and expert analysis regarding global currency markets.
- Reuters: Reuters provides comprehensive coverage of global financial markets, including forex. Its currency section offers news, analysis, and live updates on economic events impacting currency values – including historical performance and a comprehensive calculator.
- Financial Times: The Financial Times is renowned for its in-depth analysis and coverage of global economic and financial news. Its currency section is less often updated than the first two but provides deeper insights into economic trends and geopolitical events that affect the forex market.
Central Bank Statements and Press Conferences
Central banks play a pivotal role in forex markets. Their decisions on interest rates, monetary policy, and economic forecasts can cause significant currency movements. Accessing and interpreting central bank statements and press conferences is essential for forex traders.
Live coverage of these events is available through various financial news platforms like aforementioned Bloomberg and Reuters. Understanding the nuances of central bank communications can help traders anticipate market reactions and adjust their positions accordingly.
Singapore Forex News
The Monetary Authority of Singapore (MAS) is the regulatory financial body of the Singaporean market. The MAS website has a comprehensive media library, featuring press releases, speeches, parliamentary replies, and others.
It also publishes the Monetary Policy Statement, a document stating the official interest rate of the Singapore dollar with the accompanying analysis, including statements about the economic activity, growth, and inflation outlooks.
Economic Calendars
Economic calendars are indispensable tools for forex traders. They list scheduled economic events, such as GDP releases, inflation reports, central bank meetings, and their expected impacts on currency markets.
While economic calendars are indicators for popular platforms (like MetaTrader 4), most traders use calendars on websites such as MyFxBook or Forex Factory. These calendars typically show the market activity for the entire week, breaking down the news per day and highlighting the important releases in red color.
Forex Calendar indicating high and medium impact news, Source: MyFxBook
Frequently Asked Questions
What news affects the forex market the most?
U.S. economic news, such as interest rate decisions, GDP projections, and employment, moves forex markets the most. Given the USD’s status as the world’s reserve currency, news impacting its supply and demand has the greatest influence on the market.
When does the most important forex news happen?
The most active period for forex news is usually 8:30 AM Eastern Standard Time. For Central Europe, that is 2:30 PM; for Singapore, it is 8:30 PM.
Note: Any opinions expressed in this article are not to be considered investment advice and are solely those of the authors. Singapore Forex Club is not responsible for any financial decisions based on this article's contents. Readers may use this data for information and educational purposes only.
