The Effect of News Reports

Reports and other fundamental economic data have a profound effect upon financial markets. Even the anticipation of a Forex news report release can spark a flurry of buying or selling. For example if a report on employment rates is due to be released at noon, the morning trading will reflect what traders think that report states. This trading of the news is a popular method of trading both stocks and currencies.

But how do people know which way to go when predicting news releases? News releases do not occur in a vacuum. There are usually some reliable indicators out there that anticipate how a report will impact the economy. Let’s look at the employment report once again to illustrate this example. When the job data is released, there will be a large movement in response to this. But prior to the release, you will have people trading in reflection of which way they think the market will move. Expert analysis is usually correct in this regard and many times, the information is blatantly hinted at by officials before the report’s official release.

Futures will sometimes lead the way here. The people behind the buying and selling of futures are usually the most aware of how markets will respond and they are often correct in predicting data. As such, if futures prices drop, the appropriate section of the current stock market usually follows this trend. So in reality, while news has a huge impact on trading, the markets will attempt to predict the news well before the official announcements are made. Traders using specific brokers such as WorldProFX will benefit from being proactive.

 
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