If the quote currency has a good news report come out does the exchange rate go down?
For example EURUSD, the US announces the unemployment rate goes down so in theory the USD should get stronger. When looking at the chart the exchange rate should, in theory, go down correct? Where as if EUR announces their unemployment rate goes down then the exchange rate should go up?
Its definitely true that falling unemployment is good for the national economy for the currency concerned. And a strong economy is generally positive for the currency against currencies based in weaker economies.
But in practice, good news is not always followed by an increase in value of the currency. An exchange rate will change today partly because of what the market believes it will do in the future. So, if the forex market has been confident US unemployment would fall, the big banks might have been buying USD for 6 months now. Therefore, when the lower unemployment figures are released, although its good news, there is little appetite to buy USD as there is now no immediate expectation of further good news. The rational thing for the market to do is therefore sell at least some USD in order to crystallise the profits made by its rise in value.
2 Likes
Sometimes news does not follow through, @tommor explained perfectly.