News trading has steadily increased over time and is slowly starting to become one of the most popular forms of trading. Traders are presented with a lot of new and unique trading opportunities through the differing news events, all in a shorter period of time than most other forms of trading. It’s quick and to the point, which is what most traders who operate on an FX trading platform are looking for.
There are, however, different types of news, and not all of them are noteworthy for a trader. Some news events just aren’t worth following, and with the amount of news that is currently coming out in the world every single day, it can be very easy to lose hours on end keeping up with the latest news that doesn’t even have an effect on the market. This is where knowing what kind of news is important for trading is crucial for traders.
Here are some of the most popular news pieces that have a common effect on most currency trading pairs.
Contents
Unemployment Rates
When a major economic country releases its monthly unemployment rate, it is then possible to see how the currency is doing overall. If the unemployment rate has lowered (which is the aim of every economy and the central banks), then the valuation of that currency will increase and become stronger against other currencies.
This is important news to keep up with because it has a direct impact on the value of
different trading currencies.
Gross Domestic Product (GDP) Growth Rate
Much like the unemployment rates mentioned above, the gross domestic product rate of a country indicates where that country is economical, how healthy they are, and will be going forward. The GDP of a country can act as a scorecard, if you like, of how that particular country is doing overall.
If you follow a country’s GDP growth rate, you’ll be able to see whether or not that country’s currency will rise or fall in the near future and whether or not it’s going to be worth trading.
Consumer Price Index (CPI)
The consumer price index measures the inflation rate of a country’s economy compared to the previous year. This is definitely worth following in the news because inflation rates consistently rise and fall each year and continue to have a major impact on the trading industry and currency pairs that are traded.
A simple understanding of the CPI and inflation, in general, will take you a long way as a trader.
Retail Sales
As mentioned above, the GDP is the ultimate, overall indicator of a currency’s strength. Below this indicator sit many macroeconomic indicators of currency strength, and retail sales are one of them. When a country’s retail sales are high or growing, it’s a good indicator of the possible future GDP growth rate, which is a good thing to know as a trader!
When consumers feel safe and secure within their jobs and in their current economic climates, they tend to spend more money on retail purchases. This is a base-level indicator of a currency’s strength, but it is an indicator, nevertheless.
Housing Data
Much like the above-mentioned retail sales data, housing data is also good, if not macroeconomic, an indicator of a currency’s strength and a country’s possible future GDP growth. When the housing market of a particular country increases, it’s safe to say that people in that country are feeling more stable and secure with their personal finances; hence they are willing to spend a lot of money on purchasing a house.
As with retail sales, the more the housing market increases, the better indicator of currency strength it is, and the more it will contribute to the overall GPD of that country, which is also mentioned above.
Purchasing Managers’ Index (PMI)
This index is based on a survey that is conducted amongst the key purchasing managers of a particular country’s economy. This survey asks these managers questions about their upcoming business decisions, like the expansion of the business and hiring of new staff. This is a good indicator of an upcoming recession or period of growth because the results show what key purchasing managers are trending toward in their various businesses and whether or not that indicates growth overall.
Conclusion
While there is a constant stream of news coming at you every hour of every day, not all of it is beneficial to you and your trading career. This is why it’s important to nail down a few key pieces of news to focus on and follow diligently as you continue to progress along your trading journey.
The above types of news are critical to any trader and anybody wanting to keep their finger on the pulse of international economics. Don’t get overwhelmed; just scale wisely!
