Economic indicators

Why the calendar matters

The foreign exchange market spends most of its time drifting on flows and positioning, and then moves sharply for a few minutes when a scheduled number is released. Those minutes are where spreads widen, slippage grows and stops are hit, and they are also where the trend for the next week is often set. Knowing what is due, when, and roughly what the market expects is the minimum preparation for holding a position through a trading day.

The releases that move currencies

• Central bank decisions: the interest rate itself, the statement, the vote, the forecasts and the press conference. The Federal Reserve, the European Central Bank, the Bank of England, the Bank of Japan, the Reserve Bank of Australia and the others each meet on a published schedule, and their meetings are the largest scheduled events for their currencies.
• Inflation: the consumer price index and its core measure, because inflation is what central banks target. A surprise here moves rate expectations directly.
• Employment: the United States non-farm payrolls report on the first Friday of the month is the single most traded release in the calendar; unemployment and wage figures elsewhere play the same role.
• Growth: gross domestic product, quarterly and revised, and the monthly purchasing managers' indices that anticipate it.
• Retail sales, industrial production, trade balances and consumer confidence, which fill in the picture between the larger releases.
• Speeches and minutes: central bankers' remarks between meetings, and the minutes of the last meeting, which the market reads for hints about the next.

The surprise, not the number

A release moves the market by the difference between the actual figure and what was expected, not by the figure itself. Economists' forecasts are collected and published as a consensus before each release, and the price already reflects that consensus. Strong employment growth that matches the forecast can leave a currency unmoved; a weak figure against a strong forecast can move it a hundred pips. Calendars show the previous figure, the consensus and, once released, the actual, and the gap between the last two is what to watch.

Reading a calendar

A good calendar shows each release with its time in your zone, the currency it affects, an importance rating, the previous value and the consensus. The site's economic calendar does this for the currencies its readers trade. Importance ratings are a guide rather than a rule: a medium-rated release can move a market that is primed for it, and a high-rated one can pass quietly when it matches expectations.

Trading around a release

The safest approach to a major release is to have no position sized for a calm market open through it, and no market order pending in the minute either side. Traders who trade the release itself usually wait for the first move to complete and the spread to normalise, then trade the reaction, rather than trying to be in before the number. Whatever the approach, the release is a known moment of high volatility, and the market volatility article explains what that does to spreads, slippage and stops.