Learn more about the economic calendar and why it is important for forex traders

Every day, hundreds of economic events take place around the world that can affect the forex market. A forex trader does not need to follow all of these releases, as they will be mainly interested in the economic indicators that affect the currencies they are trading.

To keep track of relevant releases, traders use a global economic calendar. This tool allows them to monitor key economic data releases and important news events that may create volatility in financial markets and impact trading decisions.

The economic calendar provides a list of the scheduled dates of significant news releases or events that may affect the movement of the forex market and the financial market as a whole.

Many forex and financial websites provide an economic calendar for their readers. One of the most popular economic calendars is the Trading Economics economic calendar.

This tool provides a user-friendly calendar that includes the following data:

⦁ Economic events for a particular country

⦁ The release time

⦁ The level of the impact on the markets

⦁ The market consensus (estimate)

⦁ The previous reading

Once the event is released, it will appear almost immediately on the calendar.

Let’s take a closer look at Australian CPI: The CPI data is for August and was released on September 24 at 1:30 GMT. The impact of the event is red, which is the highest one. The consensus was a reading of 2.9% year-on-year, and the actual reading was 3%, which resulted in a deviation of 0.38. The previous release (July) showed a gain of 2.8%.

If the reader clicks on the event, a detailed summary of the event appears.

In the case of the Australian CPI, the summary notes that, “[a] high reading is seen as bullish for the Australian dollar (AUD), while a lower reading is seen as bearish”. This is important information for a trader with an open AUD position – ahead of the Australian CPI release, the trader sees that the markets are expecting CPI to rise to 2.9% from 2.8%, which should send the Australian dollar higher.

As we can see on the calendar, CPI was actually higher than expected with a reading of 3%, and the Australian dollar strengthened (as expected) but only for a brief period, as it then reversed direction and posted a small decline.

A key economic event on an economic calendar refers to a high-impact release that has the potential to cause significant volatility in the financial markets. These releases are often called “market movers” because there is a high likelihood that these events will impact the markets after their release.

Among the most important key events are central bank interest rate decisions, US nonfarm payrolls (NFP), and the Consumer Price Index (CPI).

Let’s take a look at these events and see how they could affect a trader’s position.

The rate decisions of major central banks often have a strong impact on the currency markets. For example, if the Bank of England lowers interest rates, the British pound will often depreciate, as investors are receiving less interest on their British pound assets. Conversely, a rate hike will often boost the pound since the currency becomes more attractive to investors.

US nonfarm payrolls are a key event because job growth is a critical indicator of the health of the US labour market and the economy as a whole. If nonfarm payrolls are stronger than expected, this points to a solid economy, which often will lead to a stronger US dollar. Conversely, weak job growth points to a cooling economy, which can weaken the dollar.

In recent years, consumer inflation has become one of the most important economic events. The Federal Reserve has viewed inflation as a top priority and has responded to inflation moves by raising or lowering interest rates. The Fed raised interest rates as high as 5.5% in 2023-2024 in order to curb high inflation, and has slowly lowered rates in response to falling inflation.

There is no guarantee, of course, that market-mover releases will actually move the financial markets, especially if the actual reading is close or matches the market estimate. If, however, the reading fails to meet expectations, the result could be significant price volatility and increased risk of loss.

An example of an unexpected release moving the forex markets was the Reserve Bank of Australia’s rate decision in July. The markets had widely expected a quarter-point rate cut, but the central bank instead held rates, saying it needed to see additional inflation data. The move was completely unexpected and resulted in strong volatility in the financial markets, including the Australian dollar briefly climbing almost 1% in the aftermath of the rate decision.

In addition to economic releases, news events can also have a significant impact on the financial markets. A speech from US President Trump or from the head of a major central bank, such as the Federal Reserve or the European Central Bank, are market-moving events, which will also be listed on the economic calendar.

In conclusion, traders and investors use the economic calendar to plan trades and to monitor events that could affect their open trade positions. The calendar provides economic events in real-time and is a valuable tool to keep track of releases that can move the forex market.