An economic calendar is one of the most essential tools in a forex trader's arsenal. It provides a schedule of upcoming economic data releases, central bank meetings, and geopolitical events that can cause significant price movements in the currency, commodity, and equity markets.
Understanding Impact Levels
Each event in the calendar is assigned an impact rating — High, Medium, or Low — indicating its potential to move the markets:
- High Impact (Red) — These are the major market movers. Events like Non-Farm Payrolls (NFP), Consumer Price Index (CPI), Federal Reserve rate decisions, and GDP releases can cause 50-200+ pip movements in major pairs within minutes. Most professional traders either close positions or tighten stops before these events.
- Medium Impact (Orange) — Events like retail sales, manufacturing PMI, trade balance, and housing data can cause 20-50 pip movements. They're important for building a macro picture but rarely cause extreme volatility on their own.
- Low Impact (Blue) — These include speeches by minor officials, consumer confidence surveys, and secondary indicators. They usually cause minimal price action but can occasionally surprise markets.
Key Economic Events Every Forex Trader Should Watch
The following events consistently produce the highest volatility in the forex market:
- Non-Farm Payrolls (NFP) — Released first Friday of every month (USD). The single most volatile regular event for forex markets.
- CPI / Inflation Data — Released monthly for major economies. Directly influences central bank rate expectations.
- Central Bank Rate Decisions — FOMC, ECB, BOE, BOJ, RBA, and others. Rate changes or hawkish/dovish surprises can reshape trends.
- GDP (Gross Domestic Product) — Quarterly measure of economic health. Significant deviations from forecasts cause major moves.
- PMI (Purchasing Managers Index) — Leading indicator of economic activity. Both manufacturing and services PMI are closely watched.
Trading Strategies Around Economic Events
Experienced traders use the economic calendar to plan their trading week. Here are common approaches:
- Avoid high-impact events — Many systematic and algorithmic traders close positions 15-30 minutes before major releases to avoid unpredictable volatility.
- Straddle strategy — Place pending orders above and below the current price before major events, aiming to catch the breakout in either direction.
- Fade the spike — After the initial reaction to an event, prices often retrace. Some traders wait for the spike and trade the reversal.
- Forecast vs. Actual — Compare the forecast value with the actual release. A significant deviation (surprise) from the consensus forecast is what drives major price action.
How Broker Infrastructure Matters During News Events
During high-impact economic releases, broker execution quality becomes critical. Spreads widen, slippage increases, and requotes become common on brokers with poor infrastructure. Brokers with servers located close to major liquidity providers (London LD4, New York NY4/NY5, Tokyo TY3) typically offer better execution during volatile news events.
BrokersDB tracks server infrastructure for 500+ brokers across 69 countries, helping you find brokers with optimal execution for news trading. Compare broker server locations and infrastructure quality before choosing your broker.