How to Trade the News for Beginners

November 10, 2022 15:36

How to trade the news for beginners? Priority number 1, always manage your risk.

News trading is largely based on short-term price trends, meaning the rapid movements of an underlying asset following a macroeconomic report. The market’s reactions to economic reports can be unpredictable, thus the need for risk management in every trade.

What are economic reports?

Economic reports gauge the health and growth of the economy and are also known as trading news. Depending on the circumstances, an economic report might become more important and influential than usual. In 2022, for example, inflation reports became more prominent because of an unusual increase in prices after the pandemic.

Beginners should start by observing the market’s reactions to the main economic reports that affect national currencies. These vary according to the country’s size, development and the current state of the economy. Let’s look at scenarios from five countries and regions to see how and why their currencies might move after these reports.

Three news reports that affect the GBP

The Great British Pound (GBP) is the UK’s national currency and symbolizes the world’s sixth-largest economy. As a mature and transparent economy, the country’s trading and investing markets are fully developed. Market participants know when the news reports will be available and can plan their decisions ahead of time.

In the post-pandemic circumstances of rising interest rates, low growth and high inflation, GBP-linked assets will likely be affected by these reports:

  • Bank of England interest rate decisions,
  • Gross Domestic Product (GDP) reports,
  • Consumer Price Index reports.

Whether the GBP trends upwards or downwards when the reports are announced depends on the currency pair you are trading in because these relationships work like a scale, if one side moves up, the other moves down.

News reports that affect the USD

The US is the world’s largest economy and at the time of writing, the US Dollar is one of the strongest currencies because of the Federal Reserve’s interest rate hikes. Prevailing trends in the US economy at the time of writing are a strong job market, surging crude oil exports, and tighter credit conditions. For these reasons, USD-linked assets could be affected by trading events such as:

  • Federal Reserve monetary policy statements,
  • monthly employment research like the Non-farm Payrolls report,
  • the US Energy Information Administration (EIA) crude oil bulletins.

Trading events that affect the Yen

Japan’s national currency the Yen is viewed as a safe-haven asset along with the US Dollar. As the third-largest economy in the world, Japan’s prevailing trends include comparatively low inflation and interest rates, and a strong retail sector. Given these reasons, the value of the Yen versus other currencies could change when these reports are released:

  • Bank of Japan interest rate decisions,
  • Retail Sales reports,
  • Consumer Price Index releases.

Bear in mind that the USDJPY currency pair is one of the most traded instruments in the currency markets and can fluctuate after each economic report.

Economic releases that impact the EUR

The Eurozone is the world’s largest trading bloc, and the EUR can be affected by differences in performance across the 19 member states within the Euro Area. It is difficult to reach a homogeneous standard given the variety of economies that make up the Eurozone, making it important to monitor key reports in the largest markets such as France, Germany and Italy.

  • GDP reports.
  • Manufacturing and Services Purchasing Managers Indexes (PMIs).
  • Policy decisions from the European Central Bank.

Which reports influence the AUD?

The 13th largest global economy, Australia, is a developed country with powerful mining and raw materials and exports sectors. As such, the Australian Bureau of Statistics releases macroeconomic reports that could affect the Australian Dollar (AUD).

  • Mineral exploration reports on gold, silver and iron ore, amongst others.
  • International Trade in Goods and Services reports.
  • Exports of Lithium insights.

To summarize, trading on news takes research and analysis. Participate in Admirals free Webinars to understand how to trade on news. Our expert traders demonstrate the general principles of trading analysis to support your risk management and decision making.

Free trading webinars

Tune into live webinars hosted by our trading experts

This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.

Sarah Fenwick
Sarah Fenwick Financial Writer, Admirals London

Sarah Fenwick's background is in journalism and mass communications. She has worked as a correspondent covering Swiss Stock Exchange news and written about finance and economics for 15 years.