Why economic data matters
Currencies reflect expectations about an economy's growth, inflation and interest rates. When official data differs from what markets anticipated, prices can reprice quickly as participants adjust positions.
This does not mean any release moves markets in a predictable direction. The reaction depends on expectations, positioning and the wider context.
Central bank decisions
Interest-rate announcements and policy statements from institutions such as the Federal Reserve, the European Central Bank and the Bank of England are closely watched. Changes in tone can matter as much as the rate decision itself.
Inflation and employment
Consumer price indices indicate how quickly prices are rising, which influences policy expectations. Employment reports, such as the US non-farm payrolls, provide insight into labour-market strength.
Growth and sentiment indicators
GDP releases, purchasing managers' indices and retail sales data offer a picture of economic momentum. Sentiment surveys can signal turning points before they appear in hard data.
Managing event risk
Spreads may widen and prices may gap around major releases. Many traders review the economic calendar in advance, reduce position size or avoid holding positions through high-impact events.