Economic Calendar
What Is An Economic Calendar
An economic calendar is an important tool used by professional traders to keep track of economic news as it relates to the different financial markets they trade. For example, a forex trader who primarily trades the major pairs would want to pay special attention to high impact news releases for the U.S. dollar as there is typically a massive spike in volatility as things like the federal reserve interest rate decisions, NFP, unemployment reports, and CPI can cause the market to move a lot.
Why Use An Economic Calendar
One of the main reasons a trader would want to keep tabs on these major economic news events is because the spike in volatility can present a huge risk for them if they’re thinking of entering, or are entered into a position in the market as these economic news releases happen. While there are some traders who actually trade news, the risk of slippage (where your orders potentially aren’t filled due to a lack of liquidity) is the primary reason why most traders actively avoid it.
Slippage can cause you to lose a lot of money, as your order could get filled way past your stop loss level, resulting in a loss that is anywhere from x2 or even x10 your original risk.
What Is High Impact News?
High impact news events are characterized by events that involve things like interest rate decisions by major world banks, CPI, Non-farm payroll, FOMC meetings, and trade data. These news releases typically cause massive and unpredictable swings in the market, which can lead to considerable negative slippage if you happen to be in a position while they release. Depending on what instruments you trade, you’ll want to pay attention to different news reports.
For example, if you trade oil, you’ll want to pay special attention to the weekly petroleum inventory report released by the U.S. Energy Information Administration (EIA), as it causes oil futures, ETFs and CFDs to move with a lot of volatility.
If you trade stocks or indices, it’s important to pay attention to things like earnings reports for specific companies, and/or broader economic releases like PMI.
The Impact of Geopolitical News & Events
Another major thing that can affect markets at a moment's notice are major geopolitical events. Things like war, trade embargoes, natural disasters, climate change, and even supply chain disruption can cause huge swings in the market to occur.
This is especially true for commodities, equities, and even currencies. The major difference between geopolitical events and high impact economic news events is that they aren’t really something you can plan for.
Important High Impact News To Pay Attention To As A Trader
As a trader it’s your job to pay attention to relevant high impact news events so you can protect yourself from the risk of negative slippage from being in a position while news is being released. I actually recommend to traders to avoid trading at least 15-30 minutes before and after high impact news events, because sometimes the market’s reaction can actually be delayed.
Let’s delve into some of the most common high impact news events that you’re going to encounter, and what markets they tend to affect most. Not all news events affect every market.
Interest Rate Decisions By Central Banks
Interest rate decisions are probably the most influential news releases, that central banks such as the Federal Reserve (Fed) or the European Central Bank (ECB), which are used to regulate economic growth and control inflation. Raising interest rates typically strengthens a country’s currency by making it more attractive to investors, but it can also slow economic activity by increasing the cost of debt.
On the other hand, lowering rates can stimulate economic growth by making borrowing cheaper but can also weaken the currency. These decisions are closely monitored by traders and investors as they significantly impact financial markets, from currency values to stock and bond prices.
Monetary Policy (i.e. FOMC Meetings)
Monetary policy meetings, like those held by the Federal Open Market Committee (FOMC), determine the direction of a central bank's actions, including interest rate adjustments and asset purchases. These meetings are important because they shape the financial environment by influencing borrowing costs, liquidity, and investment. FOMC news releases can cause very significant reactions in the market, particularly in stocks, bonds, and forex markets.
Inflation Rate (CPI/PPI)
Inflation measures, like the Consumer Price Index (CPI) and Producer Price Index (PPI), track the changes in prices for goods and services over time. These news events are critical for getting a measure of the cost of living, as well as the purchasing power of a particular currency.
Rising inflation often leads to central banks tightening monetary policy by increasing interest rates, which makes it more expensive to borrow money, and in turn slows down economic activity. It’s important that traders pay special attention to these high impact news events, as inflation trends dictate monetary decisions and significantly impact the currencies market.
Non-Farm Payroll (NFP)
Non-Farm Payroll is typically seen as a barometer for the U.S. job market. It shows how many jobs were added (or lost) across industries like construction, manufacturing, and tech. However, it does not include farming jobs (hence the name).
When this report shows strong job growth, it’s a sign of economic strength and stability in the job market. But if the numbers come in below the expectation, it can trigger fears of an economic contraction. For traders NFP and Unemployment which usually releases on a Friday during the New York Session is characterized by massive moves in the currency and indices markets, so many traders avoid trading on that day altogether.
Unemployment Rate
The unemployment rate is another very important high impact news release, which shows what percentage of people who have recently been looking for work, but can’t find a job. If it’s low, it suggests a thriving economy where businesses are hiring and workers have options.
If unemployment is too low, it could signal that wages are rising fast, which could inevitably lead to high inflation. On the flip side, a high unemployment rate raises red flags about economic struggles and can push central banks to take action, like lowering interest rates to stimulate hiring. The unemployment rate tends to have a major impact on both the forex, indices and equities markets.
Gross Domestic Product (GDP)
GDP is probably one of the most important economic indicators that is used to measure the economic output of a country. It sums up the total value of all goods and services produced, meaning everything from cars, clothes, electronics, services and more. If GDP is growing, it shows that a country’s economy is healthy and expanding. If it’s shrinking it shows that a country’s economy isn’t performing well, and is contracting.
When quarterly GDP numbers come out, everyone from policymakers, investors, traders and businesses take notice. It’s not just about numbers; it’s about understanding whether the economy is growing or contracting.
Retail Sales
Retail sales, also known as “Core Retail Sales” measure spending in stores, online, and on everything from groceries to consumer electronics. When spending is strong, it’s a sign that people feel good about their financial situation, so they spend more. Weaker sales however can mean that people don’t have enough disposable income to spend.
This data is important because consumer spending drives a huge proportion of economic activity. For businesses, it’s a gauge of consumer demand, and for investors and traders, it can heavily influence stock prices, especially for retail and consumer-focused companies. This is another major economic news event that you’ll want to be aware of if you trade the forex or indices markets.
Corporate Earnings Releases
Earnings releases provide a critical look into a public company’s financial health and operational performance. Each quarter, businesses disclose key metrics such as revenue, net income, and profit margins, offering stakeholders an idea of how the business is operating financially.
These reports aren’t only important for individual stock valuations but also serve as a broader measure of a particular industry's economic performance. Strong earnings typically give investors and traders confidence, while weaker than expected results can cause a stock to drop in value. For analysts and investors, earnings season is a vital period for assessing risk, opportunity, and future of a publicly traded company. If you trade individual stocks, equities, or indices, this is one of the most important types of news releases you’ll need to pay attention to, so you can avoid slippage and plan your trades ahead of time.