5 top economic news that affect the USD rate

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If you are trading any currency pair that is combined with the dollar, such as EUR/USD, USD/JPY, or GBP/USD, it’s important to know which economic announcements influence this currency. Not knowing when an announcement is coming out or its implications can catch many traders by surprise. Below you’ll find a brief explanation of the 5 top economic news that affect USD rate.


5 TOP ECONOMIC NEWS

Non Farm Payroll – This report is released every month and is by far the biggest market mover. With a few exceptions it is released on the first Friday of every month, and by looking at previous historic data one can see that the movement of 100 pips or more is not uncommon. In short, this report measures the amount of new jobs created in the US economy. The reason it creates such large movements in the market is that the US central bank is very sensitive to job growth, and as a result will adjust its monetary policy accordingly. If the announced number comes above expectations, one can expect that the dollar will go up after the news.

CPI – It stands for Consumer Price Index and is a measurement of inflation. Specifically, the report will take a basket of goods and compare the changes in prices from the previous period in time to today. The reason this report is important for trading is that the US central bank must constantly monitor inflation. Any number coming out above expectations suggests that the dollar could rise.

Trade Balance – This report is a comparison of the total amount of money leaving the US vs. the amount coming in. Historically, the United States has run a negative trade balance, meaning more dollars leave the country every fiscal quarter than come in. When this number comes out below expectations, meaning the deficit is larger than was expected, it is a sign of dollar weakness. On the other hand, if this figure were to come out positive, that’s a good sign for the dollar.

Unemployment – This report will come out shortly after the non-Farm payroll announcement, also known as NFP and is important to watch as it measures the change in employment growth for the US economy. Sometimes, the NFP number will come out above expectations, creating a rise in the dollar, however, one also has to pay attention to the unemployment figure. If this number comes out below expectations, then the initial rally of the dollar could be short lived.

Federal Reserve Meetings – Unlike the previous indicators listed, the meetings and speeches by Federal Reserve members do not happen each month consistently. These speeches and announcements are crucial to those following the dollar because they often give clues as to whether the central bank will raise or lower interest rates in the future. Any sign that the central bank will consider raising rates is a bullish announcement for the dollar, while any indication of the lowering of rates signifies weakness.

HOW TO BENEFIT FROM THE LIST ABOVE?

Check out our previous article about the trading strategy based on economic news and announcements. Wishing you profitable trading!