News events in Singapore can significantly impact the global Forex market. Here are some of the most important news events that traders should be aware of:
The release of economic data
The economic data release is one of the traders‘ most important news events. This is because the release of economic data can affect the direction of the currency markets. For example, a strong positive or negative economic report can cause a corresponding movement in the currency markets.
The announcement of monetary policy decisions
The announcement of monetary policy decisions is another critical news event for traders. It is because changes in monetary policy can lead to movements in the currency markets. For example, if the central bank announces increasing interest rates, this can lead to a rise in the currency’s value.
The announcement of political decisions
The announcement of political decisions is another critical news event for traders. It is because political decisions can significantly impact the currency markets. If there is a change in government, this can lead to a movement in the currency markets.
The release of economic data announcements
The release of economic data announcements is another key news event for traders. It is because economic data announcements can cause movements in the currency markets. For example, a major announcement such as the release of GDP data can cause a movement in the currency markets.
The release of central bank interest rate announcements
The release of the central bank interest rate announcements is another key news event for traders. It is because changes in interest rates can lead to a movement in the currency markets. For example, if the central bank announces increasing interest rates, this can cause a rise in the currency’s value.
How news impacts the forex markets
News impacts Forex prices because economic factors, including interest rates and inflation, are central to currency generation. It means that if these factors rise or fall at a particular rate or specific number, there will be either more demand for the respective currency (thus causing an increase in its price), thus creating higher returns for those who hold it. Alternatively, a lack of demand for the currency will see it decrease in price – representing a financial loss for those who hold it.
Thus, news events that indicate a change in any of the central economic factors (e.g. an increase in interest rates) would be considered as having a significant impact on Forex prices. The reason for this is that investors (both retail and institutional) will attempt to anticipate how said news events might affect future currency prices and act upon this information by buying or selling currencies accordingly.
Risk management in forex trading
Now we understand why the news has such an impact on Forex prices, let’s move on to how you can use risk management to mitigate its influence. You must first identify the sources of risk that are likely to impact price fluctuations. It can be done by listing down the sources of relevant data that are important in the decision-making process of investors, including but not limited to news events.
For example, releasing information regarding a country’s inflation rate is an economic factor that directly impacts its currency value. Once these factors have been identified, it’s time to determine whether they are predictable or unforeseen. Predictable sources of risk include fiscal reports such as GDP and employment data.
Unexpected (and therefore unplanned) sources of risk include natural disasters like earthquakes and tsunamis, which may cause significant financial damage due to infrastructure damage and subsequent loss of output.
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