Macro analysis in the FX market is complicated for many traders because foreign exchange participants don’t necessarily digest economic data the same way as their stock counterparts, and there’s also data from multiple countries to contend with. It takes a vigilant trader to stay on top of it all.
Not all the reports have immediate importance, but some are crucial, and it is essential to know which constitute news and affect market sentiment and which are irrelevant at a given time. “How economic reports affect the FX markets depends on whether you’re trading in a declining, or weakening environment,” says Brian Dolan, vice president of research at Gain Capital. “Fundamentals have a lot of weight in a weakening environment.”
Naturally, reports that reflect the U.S. job market are more important during a weak economic environment.
When the environment strengthens and the economy is improving, inflationary reports become more of a focus.
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