The economic calendar is a timetable for the release of various news, events, and economic reports. Investors and traders use the economic calendar to plan their trades and reallocate investment portfolios, as well as for fundamental market analysis.
Most traders customize the calendar based on their own filters based on the regions, asset classes, and currencies they trade.
What Is The Economic Calendar?
- News release time.
- The currency will be affected by the news release.
- The importance of the news, which may affect volatility.
- Title of the event, speech, or economic report.
- Actual indicators.
- Projected indicators.
- previous indicators.
- The economic calendar shows not only events that will be published in the future but also previous events. If you are interested in the impact of certain news on the price, you can check how the release of this news was reflected in the trading instrument in the past.
- There is nothing more important than knowing which currency is affected by the release of the news. If the news comes out in the Eurozone, it will affect the euro the most, so pay attention to the currency pairs with the euro, which will be the most volatile. If the news comes from Australia, the Australian dollar pairs will be the most active. If the news comes out of China, it will also affect the Australian dollar, since it is a well-known fact that Australian exports go mainly to China.
- You should pay attention to the previous data, then the predicted and actual. After the release of the news, algorithms or advisers first come into play, and only then are real traders and people. If the actual price value exceeds the predicted values, it is usually bullish for the currency. If the reports indicate negative data, this indicates the weakness of the currency.
As far as stocks are concerned, economic news influences price dynamics at the macro level.
For the oil market, the same economic calendar provides information on the level of oil reserves. If inventories are larger than expected, oil is said to be piling up and this is a bearish signal as it shows less demand. Therefore, higher inventories should lead to lower oil prices.
If you don't use an economic calendar, you might feel like you're wandering in the desert without a map or compass.
Check the economic calendar every day in the morning to get an idea of what news will be released during the day and what currencies it may affect. Traders often avoid trading during news releases, as liquidity often drops at this time, as well as widening spreads and possible slippage along with requotes.
If you have open positions in some of the affected currencies, please consider closing your current positions if you believe that the publication of the news may negatively affect them.
In the economic calendar, you will find the forecast and past performance for each report. If the actual value exceeds the predicted value (for example, for GDP), this should be beneficial for the base currency. Conversely, if actual performance is less than forecast, this should hurt the base currency.
For a novice trader or investor, it is necessary to pay close attention to the data that is published in the economic calendar. If you are going to respond quickly and effectively to the ever-changing currency markets, you must be absolutely sure that you know the release time of major economic reports and news events.
You cannot make successful trades without knowing the current state of the market. Even small events can cause short-term price fluctuations in the market and hit your stops. Therefore, it is necessary to constantly check the economic calendar and be aware of any news reports and reports.
Reports In The Economic Calendar
Interest rates
Interest rates are the rates at which central banks lend to private banks. They are the main instrument used to regulate inflation. Interest rates are deliberately announced during press conferences by central bankers to avoid unnecessary market turmoil. Commercial lending rates go hand in hand with central bank interest rates, as private banks cannot lend for less than they borrow.
Interest rates are a powerful regulator of the economy. In a well-regulated and balanced economy, central banks can raise interest rates to reduce lending and cool the economy by lowering inflation. This reduces consumer spending, helping to bring price increases to a more manageable level.
Conversely, if there is not enough money in circulation and the central bank seeks to stimulate the economy, it lowers interest rates, making the cost of money cheaper for businesses and individuals.
Rising interest rates tend to cause the value of a currency to rise as supply shrinks. Conversely, when interest rates fall, currencies depreciate.
Data on the number of new jobs created outside the agricultural sector (NFP)
The US Bureau of Labor Statistics releases carefully monitored monthly non-farm payrolls as part of its employment report. This indicator is one of the main indicators of US economic health.
The report is published on the first Friday of the following month. This data is used to help policymakers and economists determine the current state of the economy and predict future levels of economic activity. The total nonfarm payroll accounts for approximately 80% of the workers who produce the entire gross domestic product of the United States.
The Nonfarm Payrolls report shows unemployment statistics in the US. This is evidenced by the general unemployment rate, the long-term unemployment rate, and the youth unemployment rate. The labor force participation rate is also a key statistic used to determine the real unemployment rate in a country.
Employment reports
The share of the unemployed part of the population has a direct impact on the structure of expenditures - and, accordingly, on the economy as a whole. Rising unemployment has a negative impact as fewer people receive regular wages.
GDP data
Gross domestic product measures the total value of all goods and services produced in a country during a given period. GDP is considered one of the main fundamental indicators in the economy. From the point of view of economic theory, everything is simple - GDP growth indicates economic growth.
GDP growth should also be accompanied by an increase in demand for goods and services. To meet this demand, consumers should be provided with sufficient cash. So higher GDP means more money, which means more inflation.
GDP data allows investors to assess the state of the economy and adjust their expectations. If the GDP turned out to be better than expected, this indicates the strength of the economy. Conversely, worse GDP performance usually hurts the market.
Inflation
Inflation is an increase in the prices of goods and services. Inflation is one of the most important fundamental indicators because it shows how healthy an economy is. Advanced economies set their inflation targets at 2%, while in developing countries, inflation can reach 7% without panicking investors.
The rate of inflation is best seen in the context of monetary policy. If inflation is below monetary policy targets, there is a possibility that equities may rise, but this also depends on messages from central banks.
Consumer price index
The consumer price index measures the weighted average price of a basket of goods and services for households (transportation, food, medical care), where 100 is the base value. For example, if it costs $X to buy a basic set of goods and services today, the consumer price index will be considered to be 100. When it costs 25% more in a decade, the index will be moved from 100 to 125.
This is an important fundamental because it helps measure changes in consumer purchasing power as a result of inflation. Significant increases in the consumer price index for short periods indicate high inflation, while short-term falls in the index hint at deflation.
Producer price index
The producer price index is similar to the consumer price index in many ways, only instead of measuring the cost of finished goods, it measures the costs of production. It is a weighted price index that is measured at the producer level.
Tracking production costs can help in assessing how prices can affect production levels, which in turn can help traders understand the possible impact on the economy. The fall of this index usually speaks of weakened demand for manufactured goods.
Commodity price index
The Commodity Price Index tracks the average change in the price of commodities such as oil, minerals, and metals. This is especially important for the currencies of commodity-exporting countries such as Canada and Australia. An increase in the index will mean higher prices and hence higher export earnings. However, a decline in the commodity price index would be good news for the currencies of those countries that import these goods.
Trade balance and investment flow
The balance of trade reports the difference between total imports and exports. If more goods are exported, this represents a trade surplus. This indicator is especially important for countries such as China, Japan, Germany, and emerging markets.
The flow of investment is very similar to the balance of trade, only because it weighs the total inflow of foreign investment against the outflow of total investment. The more investors that are interested in a country's business, the more international trade there is if there is a positive trade balance, and the more positive the investment level will be.
Housing construction data
This is an important indicator for the US construction market, where housing makes up a huge part of the wealth of households. After the crisis in the housing market and the financial crisis, this figure has become even more significant.
Industrial Production Index (IPI)
The IPI shows monthly changes in production for major industries such as mining, manufacturing, and utilities. This index is considered a good indicator of employment, average earnings, and overall income levels in these industries. An increase in the index indicates a healthier economy.
Even though the share of industry in economies is declining, the manufacturing sector is an important indicator of economic well-being because it is resource intensive and provides the highest-paying middle-class jobs.
Purchasing Managers Index (PMI)
The Purchasing Managers Index is a monthly report that aggregates the expectations of several thousand purchasing managers at major companies to gauge the state of the economy. It is compiled by a company called Markit Economics. Information is published during the trading month between central bank meetings.
The index is actually a poll and its results are interpreted based on level 50. Anything above level 50 is considered positive and anything below 50 is considered negative. This information relates to various sectors of the economy and these sectors are related to services and manufacturing, while in some countries, such as the UK or Australia, the PMI index also refers to the construction sector.
Managers are asked to evaluate the company based on various economic factors such as the level of new orders, the number of employees, how they see the future of the company in the next six months, etc.
Institute for Supply Management (ISM) report
The Institute for Supply Management (ISM) report measures the flow of new orders, thus predicting manufacturing activity in the economy. It is expressed as an index of 50. A reading below 50 means that the number of factory orders has decreased compared to the previous period. Since supply follows demand, an increase in the ISM index indicates that demand for goods and services has increased, which is a good sign for the economy.
Consumer confidence index
The consumer survey provides answers about the current state of households, income, financial situation, and consumer demand.
Retail sales report
Retail sales reports directly track the structure of consumer spending. The population's confidence in the economy is directly reflected in the structure of their spending.
Consumer Credit Report
Shows the status of loans for households in the economy. This is important because the growth in lending is indicative of the expected growth in income in the future and confidence in the outlook for the economy.
Durable goods
This report shows the level of demand for capital goods in the economy. This is important because it helps measure the level of investment demand in an economy.
Sales of existing houses
While home sales show demand for homes, existing sales can gauge the current state of the market and possible price changes for homes.
Unemployment claims
A report showing how many people have applied for unemployment benefits.
Manufacturing PMI
The report plays an important role in measuring the levels of production achieved by organizations per unit of labor using previously released GDP (gross domestic product) and labor force figures. An increase in business activity leads to an increase in real income, an increase in profitability at the corporate level, and a decrease in inflation.