Currency markets tend to respond the most to 'big–picture' or macro news – the kind of developments that reflect or impact broad economies. Generally speaking, currency traders look at economic news to assess its impact on interest rates and monetary policy. News that suggests a more hawkish central bank tends to push a currency up in value relative to other currencies, while dovish news can depress a currency.
Major news releases
Currency traders tend to look out for certain key economic announcements which can have an impact on interest-rate speculation, including:
- Central bank decisions and speeches
- Gross domestic product (GDP) figures
- Employment figures
- Inflation rates
- Trade balances
The release of this type of news is scheduled in advance and well publicised. News releases normally come out at a set time, for example the US non-farm payrolls employment figure is usually released on the first Friday of each month, at 1.30pm (UK time).
Market sentiment & currency trading
News related to market sentiment can also influence currencies, particularly those considered to be safe-havens, such as gold, silver, USD, JPY and CHF. These currencies tend to attract capital during times of turmoil and see outflows when markets settle down.
News that can impact risk-on, risk-off trading includes stock market returns and volatility, financial stresses at the national or continental level, political turmoil, elections, treaty negotiations and other broad news beyond economic data and central banks. Recent examples include the Greek debt crisis and China market turmoil.
How commodity prices influence currency
Currencies of countries that are major exporters of raw materials can be impacted by news affecting the prices of the main commodities they produce. These currencies are often referred to as resource currencies. The prices of the commodities that affect these currencies can be influenced by issues affecting supply and demand.
On the supply side, news that suggests a lower supply can push up prices, while news that suggests higher supply can depress prices, which can then impact related currencies. News that could reflect changes in supply may cover political tensions, wars, terrorism, weather, economic sanctions, labour relations (strikes) and more.
Speculation and pricing related to demand is mainly influenced by many of the same major news releases noted above, plus commodity inventory reports and outlooks.
Traders should be aware that demand for many commodities – and therefore the commodity's price – rises and falls with the seasons. Seasonal news and impacts are seen mainly in energy and agricultural commodities, but less so for metals.
The table below shows some of the main resource currencies and the commodities that affect them.
|Canada||USD/CAD||WTI crude oil and metals|
|Australia||AUD/USD||Base metals and grains|
|New Zealand||NZD/USD||Livestock and dairy|
|Sweden||USD/SEK||Metals and forest products|
|South Africa||USD/ZAR||Precious metals|
|Russia||USD/RUB||Crude oils, natural gas and metals|
Company news & currency prices
News that has a significant impact on individual company stocks generally speaking has no major impact on currencies. Stock market news that has little or no impact on currencies includes earnings reports, management changes, mergers and acquisitions and related rumours, partnerships and more.
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