The Forex Calendar is one of the main tools used in fundamental analysis. Since the Forex market is most affected by fiscal and monetary policy announcements, traders need to be aware of economic events and plan their trades accordingly, before opening any trade positions.
An economic calendar refers to scheduled dates of important news releases or events that may affect the financial market as a whole. It includes important fundamental news, economic reports, official speeches, and statistical figures of a country’s financial conditions, such as policies and other economic information. These events or news may affect the movement of currency exchange rates and market volatility.
An extensive economic calendar usually contains a list of relevant upcoming events for each currency, i.e., its potential market impacts, release times (date and time zone), market consensus, and previous results. In the Forex calendar, the events are marked using different colors, each color indicates a different level of impact for the respective event. For example, red is used to indicate a high impact in the Forex market, while blue, green, or gray are used to indicate a low impact.
There are various pieces of information in the Forex calendar, but not all of them are relevant to you. For example, news about RUB may not be relevant to you if you trade the AUD/JPY currency pair. To help you eliminate irrelevant information, you can use the filter to choose the news or events that are relevant to your trading.
However, there are significant news releases that you should pay attention to, especially news and events related to superpowers like America since the movement of its currency affects almost all currencies. Some of these news are as follows:
1. Fed's Decision on the Federal Funds Rate Changes
It is announced up to 3 times a year and affects investors’ interest in the US currency. High interest in the US currency will result in the growth of the USD value relative to other currencies. The Fed’s decision highly impacts the interest rates, and thereby, influences the supply and demand for goods and services.
2. Nonfarm Payrolls (NFP)
NFP is a monthly job report which covers the unemployment rate in the United States. Based on the report, if the Fed decides to lower interest rates to compensate for the high unemployment rate, then the demand for the US currency will decrease, and therefore, its value will fall.
3. Gross Domestic Product (GDP)
Growth figures, such as GDP, are closely related to a country's economic growth. GDP measures the value of all the goods and services produced in a certain country. That is why it is essential to look into and analyze the GDP reports of relevant countries to help you predict the market.
4. Producer Price Index (PPI)
PPI is an economic indicator that monitors manufacturing activities. It measures the changes in the selling prices received by domestic producers and indicates wholesale inflation. This indicator is regarded as highly influential because it helps to measure the inflation level in the economy.
5. Reports on Crude Oil Production and the Number of Oil Rigs
It is a monthly report that has a short-term effect on oil futures. The demand usually increases when oil production declines and the supply decreases when the number of oil rigs goes down. In both cases, the oil prices will increase.
We already know that economic statistics, economic indicators, central banks’ statements, and economic reports can change market sentiment significantly. That is why traders should always check the Forex economic calendar before opening a position to make an informed trading decision.
Some of the benefits of using an economic calendar are as follows:
1. Help Traders Strategize
Many forex brokers, websites, and platforms offer this feature to help traders know what is going to happen and when. The economic calendar provides detailed information about upcoming news releases. Based on this information, traders can decide how to interpret and use the news in their trading.
2. Anticipate the Market Movement
The Forex Calendar provides clues about the direction of the market and helps traders estimate the value of the currency pairs after a certain announcement, so they can anticipate their profit and loss.
3. Stay Informed about National Holidays
Aside from significant news releases and announcements, you will also be informed about the national holidays of a certain country. In this way, you’d be aware of national holidays which may affect the market liquidity.
4. Evaluate Data Differences
The Forex economic calendar provides the forecast statistics and previous results for each news and event. It enables traders to evaluate the differences in the data and compare them with the market consensus. It can help you predict the market as well as hone your analytical skills.
5. Beneficial for Scalpers and News Traders
The Forex calendar is especially beneficial for scalpers or traders who want to trade the news. By correctly analyzing the news release and predicting the outcome, traders can open their positions before the scheduled news and benefit from their trading.