#edgeforex #trading #market #stocks #money #forex #trader #forex #economic #data #inflation #dollar #bitcoin economic

In order to trade better economic data, you must understand what the market is concentrating on. 

Hundreds of economic data are produced each trading week, but only a small number of them are market movers. 

This can happen simply because the market is not focused on that particular report, or the release is mostly in line with expectations. 

You always see beginners questioning the usefulness of fundamental analysis because they see the numbers on US economic data, for example, coming out good but the market doing nothing or even the opposite. The market responds more to surprises or to specific topics on which it is focused.

 If an economic report comes out as predicted, there’s little to truly take away from it until the specifics indicate otherwise. Furthermore, if the market isn’t focused on that economic data, even if it surprises, there’s a good chance the market won’t move much. 

To trade better economic data, you must understand what the market is concentrating on. If the market is focused on employment because the central bank has stated that it would modify monetary policy based on it, then inflation reports will not move the market as much, and vice versa.

You should also be aware of where you are in the business cycle. When a country is just emerging from a recession, hardly one cares about inflation and instead focuses on jobs, durable goods orders, ISMs, construction permits, retail sales, and so on. If you are late in an expansion and inflation is high, inflation figures take centre stage because the central bank will move to slow it down, which will also temper economic growth. There is also some sort of hierarchy based on the country that releases the economic data. In general, US data are the most essential because the US has the world’s largest economy.

 “When the United States sneezes, the rest of the world catches a cold,” as the adage goes. 

That’s only to emphasise how vital the US economy is. So, if the US economy goes well, it may produce a positive risk attitude (as long as the rest of the globe is performing well), and when the US data is excellent, the USD can actually decline, as we saw in 2020 coming out of the credit crisis. On the other side, poorer and weaker US data might contribute to negative risk sentiment, causing the USD to rise as a safe haven. For example, the market is now preoccupied with inflation figures.

Why is this so? Because the US inflation rate is more than double the Fed’s objective of 2% per year and is continually rising. This, in turn, causes the market to price in a quicker tightening process by the Fed and all of the consequences that may result, such as an economic slowdown, policy mistake, recession, and so on. The market no longer cares about unemployment claims or some UK or EU statistics, for example, since what happens in the US will affect other markets.

As you can see, there is more to consider when analysing economic data than just noting if the report is better or worse than predicted or whether the economic calendar indicates that the event is of low or high impact. To trade better economic releases, you need to have a larger perspective and filter what is significant in that specific situation.