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To become a successful trader, it’s quite important to stay aligned with the economic Calendar. For those who don’t know, an economic calendar features relevant dates of any events that may impact the security prices or market situation. So, staying aligned with it is just as important as any other thing in online trading.
There are several things that are present on an economic calendar, like interest rate decisions, non-farm payroll numbers, etc. It also helps predict market volatility and get a better understanding of how the market operates.
Let’s learn about the Economic Calendar in detail:
What Does an Economic Calendar Include?
An economic calendar includes different data that affect the economy of a country or the world. Besides the listed events, an economic calendar also includes the time of data release along with the stars indicating volatility. While one star generally indicates low market volatility, three stars mean high market volatility.
Note that the Economic Calendar can be diverse. But broadly, the events are classified into Lagging and Leading Indicators. Lagging Indicator shows the outcomes of something that has already happened. Meanwhile, Leading Indicator is ideal for forecasting the future.
Examples of Leading and Lagging Indicators
Leading Indicators- Consumer confidence, job claims, average working hours, purchasing manager’s index, etc.
Lagging Indicators- Labor cost per unit output, unemployment rate, corporate profits, etc.
What is Economic Activity Data?
In an economic calendar, economic activity data include:
Purchasing Managers Index
As the name suggests, Purchasing Managers Index serves as an economic indicator that shows the current and upcoming conditions of any business to the company leaders. It’s interpreted after a thorough inspection of the private organizations that represent the major economies throughout the world.
Central Bank Meetings
Traders should follow the actions of central banks from different countries. This should be especially for the currencies that make a great pair with the American Dollar.
Having a thorough idea about their actions is just as important as choosing the right forex brokers and reading before expert comparisons like the ones which were published on DailyForex. Both ensure efficient outcomes in trading.
Some common banks that you, as a trader, must follow are:
- European Central Bank
- Federal Reserve
- Bank of Japan
- Bank of England
- Swiss National Bank
- Bank of Canada
- Reserve Bank of New Zealand
- Reserve Bank of Australia
Retail sales data is important data for the economic Calendar as it gives an estimation of total sales in retail stores. As consumer spending is a significant parameter in an economy, it serves as an important economic indicator in the Calendar. Retail sales also work as an indirect measure that decides the interest rate and inflation.
Employment Data is the best indicator to interpret the interest rates for an economy. Understand it this way, suppose a country is witnessing a good employment rate and high salaries, the interest rate for that particular location can take a toll. Meanwhile, if not, the interest rates can be lower.
Inflation Data, PPI, and CPI
PPI (Producer Price Index) and CPI (Consumer Price Index) are important economic indicators that are ideal for measuring inflation. PPI is used for measuring any changes in selling prices by domestic sellers and goods production costs. CPI, on the other hand, indicates any cost changes for the everyday goods that consumers buy.
Both the PPI and CPI serve the purpose of the Federal Reserve for deciding interest rates. Based on the data, interest rates could be higher or lower.
Other Important Events in an Economic Calendar
There are several other important events in the economic Calendar that impacts the market every month:
- Unemployment Rate
- EIA Crude OIL Inventory
- Consumer Confidence Index
- OPEC Meetings
- Gross Domestic Product
- New Home Sales
- Existing Home Sales
- Durable Goods Orders
- ISM Data
- Labor force and Payroll
- Trade Balance
Of course, it’s important to take all the above events into consideration in an economic calendar. However, if you are a forex trader, it’s important to give special emphasis to the NFP reports, Consumer Confidence Index, and Retail Sales Index. You must also look for Central Bank decisions and durable good orders.
So, Is the Economic Calendar Important?
Absolutely. An Economic Calendar works as a useful tool for all financial marketers, regulators, and traders. Being the largest economy in the world, the US economic calendar is the most important of all. So, make sure to stay updated with the same.