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What is High Impacting News?

the image is looking over a mand shoulder as he reads the news on a tablet, with a cup of coffee in the table next to him

High impact news in the Forex market is news that can significantly influence currency prices. Announcements in the news about economic and financial events can create strong market reactions and a movement in demand. Sharp price movements create volatility in the market which traders will need to navigate strategically.

It’s important to understand the different types of high impacting news. The main types of news are:

  • Central Bank meetings – Any announcements made in the news from central bank meetings, including interest rate changes and monetary policy decisions will affect the Forex market. Central Banks can control inflation and ensure the value of the nation’s currency remains steady. Any Unexpected announcements will lead to market volatility.
  • Geopolitical events – Events in the news such as elections, political decisions, trade disputes, and conflicts can have a big impact on the Forex market as it creates uncertainty. An example of this is how Brexit affected GBP.
  • Economic indicators – News about changes in economic indicators (both positive and negative) will have an impact on currency valuations. These indicators include unemployment, Gross Domestic Product (GDP), Inflation and manufacturing data.
  • Consumer Price Index (CPI) – An increase in the price of a basket of goods or services is an indication of inflation and inflation will affect monetary decisions, which in turn will cause currency fluctuations.
  • Unplanned News – A currency’s value is derived from the economic strength of its nation and any unforeseen events that make that stability uncertain will negatively impact it. Political and central banker speeches, unplanned elections, natural disasters and terrorist attacks can have a profound effect on the Forex market.

In our Trading Sessions blog we discussed how the US economy had a high influence over the world and the importance of the Dollar in Forex trading as it is one side of many Forex pairs. For this reason, economic news releases from the US are important to follow closely as they have the highest impact.

How does High Impacting News affect the Forex market?

News releases can create volatility in the market which can create opportunities with higher returns. However, the higher the volatility, the higher the risk tends to be. So it’s important to have an effective risk management strategy in place.

How can I use High Impact News in my Trading Strategy?

There are two main strategies around trading the news in Forex, these are pre-news and post-news trades.

To trade pre-news, you need to stay ahead of the news using economic calendars and anticipate market movements. This strategy allows traders to enter the market at a price when the market is less volatile. However, if the news release or how the market reacts to it is not as expected, you could experience significant losses.

By placing a trade after the news release, you will have a chance to see how the market has reacted to the news. However, the opportunity for larger profits may be missed, so there are positives and negatives to both strategies.

To conclude, traders need to stay up to date with the news, as it can have a significant impact on price movements in the Forex market. This can be used to your advantage with the opportunity for profits if trades are made at the right time. However, it can be risky and you should always have a good risk management strategy in place.

At The Forex Funder, we strive to offer a trading environment that is both stable and fair, while also allowing traders to follow their preferred trading style. However, we would like to discourage traders from relying solely on high-impact news as a strategy. It is important to note that placing and closing orders during high-impact news releases within 5 minutes before and after can result in account suspension. To learn more about news trading at The Forex Funder, please click here

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