How to use the economic calendar in trading
Fluctuations in the stock market and Forex occur depending on two main factors, namely the technical aspect of the market and its fundamental aspect. This is why the vast majority of traders start their day by looking at the economic calendar for the upcoming session in order to best apply their strategy.
The importance of market calendars, or, in other words, the release schedule of the most important economic indicators, news and events, is disputed, perhaps, only by ardent fans of technical analysis. For all other traders, speculators and even investors whose investments are made for many years, not only is it useful, but it is even necessary to reckon with the release of macroeconomic statistics, speeches by the heads of central banks and other events that can affect the movement of stocks, currencies and any assets, traded on the market.
So, let's figure out what an economic calendar is, what it is for, how to use it, and what types of economic calendars should be familiar to every trader. A reasonable and responsible trader must understand why this or that strong movement has occurred, which is often caused precisely by the publication of statistical indicators or by the speeches of central bankers or political figures. Possession of information about what is happening may not provide a direct advantage (since all this information is received simultaneously), but at least it gives an understanding of the nature of the movement.
What is an economic calendar
The economic calendar of the Forex and stock market trader summarizes the news and other important publications expected during the next trading sessions. These are the very fundamental data that affect the price of small and large markets. That is why the economic news calendar is one of the first analysis tools for a trader in various financial markets.
The trader will be informed of the following:
The time of publication in accordance with his (trader's) location.
Origin of the news (in which country the event occurred and what is the source of the publication). For example, if the USD/CAD pair is one of the pairs you are trading, you will be more attentive to the Canadian and US economic statistics.
The importance of the news, namely, the impact on the relevant asset. If the impact is small, the price of the respective currency will probably not have a significant impact. On the other hand, if important news is released, there will be high volatility of the financial asset.
The nature and wording of the news, which will allow us to judge the nature of this event, whether it be the speech of Mario Draghi from the ECB or the unemployment statistics in the US.
Results and statistics of forecasts: historical data allows you to evaluate the evolution of events and compare them with the situation on the market at the moment.
With all this information, a trader can follow the trends of the stock market in real time as well as the trends of future currencies.
How to use the economic calendar
There are many economic indicators that make up the economic agenda. The list of news that are considered highly significant will tell you how to read the economic calendar correctly.
US economic calendar
As for the US labor market, you should pay attention to the following news:
A Job Creation report that continues to create big moves in the markets, especially the Forex market.
Unemployment claims that estimate the number of new claims and update the corresponding amount.
The unemployment rate, which represents the number of unemployed people in a country.
NFP - job creation outside the agricultural industry.
Speaking about the US economy as a whole, the Economic Calendar will indicate the following:
GDP or gross domestic product, which is a measure of the total output, including goods and services, of the US economy.
The indicators of the state of production, displayed in the economic news calendar, will be as follows:
The ISM manufacturing and non-manufacturing index, which is an indicator of inflation and working conditions, allows you to assess the health of the markets.
Consumer measures will be presented:
Retail sales, which is a monthly indicator of retail sales. This data has a direct impact on consumer spending and overall consumer confidence in manufacturing companies in the country.
News about real estate and construction will be as follows:
Obtaining a building permit and starting construction
Sale of new houses.
Consumer price representations that measure the range of goods and services are widely studied by market participants.
Representation of producer prices of goods
For the retail sector, the Stock Market Calendar will include:
The balance of trade, representing the difference between imports and exports of goods and services in a country.
Finally, for the area related to monetary policy, the following news will be included:
An interest rate that will theoretically have a negative effect if it increases and a positive one if it falls for the respective country and its currency.
The rate of inflation, which is the change in the price index. This indicator corresponds to the consumer price index, which measures changes in the prices of consumer goods and services over time.
The minutes of the FOMC, which is the record of the meeting of the monetary policy committee of the Federal Reserve.
Speeches and decisions on the Fed's monetary policy.
Forex economic calendar in the European Union
From the point of view of the European Central Bank, the main news will be the following:
Monetary policy meeting announcements (eg key rate decision) and speeches by representatives of the European Central Bank.
To measure prices:
The consumer price index in the Eurozone gives an estimate of inflation in the respective area. This indicator can be determined for countries such as France, Italy, etc.
employment indicators. For example, attention will be paid to the unemployment rate (primarily in Germany - the strongest country in the Eurozone).
The following events will also be the measuring elements of the production efficiency of the European Union:
German production orders
The IFO index, which assesses the position of companies at the moment and determines their future trends.
The ZEW indicator (Zentrum für europäische Wirtschaftsforschung) is very similar to the IFO indicator, but concerns the banking sector directly.
Forex Economic Calendar for UK
Of course, there is a growth sector with GDP. But there is also a basic price indicator called the consumer price index (CPI), which measures inflation in a country. At the labor market level, the Labor Market Statistical Report assesses employment and unemployment rates, as well as the average wage index in England.
Finally, the construction and services manufacturing PMI will let market players learn about the evolution in these three main sectors.
Global economic calendar in Japan
In addition to the announcement of the GDP indicator on price indices, news about Japan will be associated with the monetary policy of the Bank of Japan (Bank Of Japan) and the publication of the interest rate and minutes of the Bank of Japan.