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Why Do You Need to Use the Economic Calendar?

Adam Lienhard
Why Do You Need to Use the Economic Calendar?

The economic calendar is a useful tool that tracks and documents important economic events and indicators on a timeline. It covers a wide range of events and announcements such as inflation data, unemployment rates, GDP, industry and manufacturing indexes, retail sales, economic confidence indicators, and more. 

How it works

Government institutions, central banks, and other economic organizations release these events and data at specific pre-announced times. These releases aim to provide up-to-date and comprehensive information on the state of the economy and future trends.

When reading the economic calendar, investors, analysts, and traders can use this information to better understand and evaluate the state of the economy and the performance of financial markets, as well as future economic expectations. 

The release of economic calendar data can affect financial markets, currency rates, commodity prices, and can be used to make informed investment and trading decisions.

Why use the economic calendar?

The economic calendar is a tool that provides traders with essential information. Economic calendar news is categorized by importance and often includes analytical expectations, allowing traders to make informed decisions. Although it is up to individual traders to interpret and make use of the news, the calendar offers crucial information about when and where to expect significant economic events. You can use the Headway economic calendar for it.

The calendar also informs traders of national and bank holidays worldwide. Trading volumes and liquidity can be affected, making this information crucial.

Once the news is released and the market reacts, the economic calendar can help traders analyze how fundamental factors influence investor sentiment. By assessing the market’s response to the news, traders can refine their understanding of how fundamental factors drive market movements.

Top 5 economic events to follow

Federal Reserve interest rate decision. The Federal Reserve’s decision on changes to the federal funds rate (typically 1-3 times per year) has a significant impact on investor sentiment towards the US currency. Increasing the interest rate tends to strengthen the value of the US dollar compared to other currencies.

US Nonfarm Payrolls change (monthly jobs report). This report provides insights into the US labor market and can impact foreign exchange rates. Understanding the impact of this report can help traders identify opportunities and make informed trading decisions.

Crude oil production and rig count reports (issued monthly). These reports have a short-term impact on oil futures contracts. A decrease in oil production usually leads to increased demand, while a decline in active oil rigs reduces the supply, both of which can result in higher oil prices.

European Central Bank (ECB) monetary policy decisions. The ECB’s decisions regarding monetary policy, such as inflation policies, bond issuance, money supply, interest rates, and deposit rates, play a crucial role in shaping future market expectations.

Macroeconomic statistics. Macroeconomic data, such as balance of payments, GDP growth, industrial production, inflation rates, price indices, and other economic indicators, can significantly impact the value of a local currency against the US dollar.

These events provide valuable insights into the global economy and can influence asset values, currency exchange rates, and investment decisions. Traders and investors closely monitor these events to capitalize on potential market movements.

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