Good point; but I’d add that flows in and out of currencies have always been driven heavily by the theme of risk. The past two years, and especially the past year as Pipdevil notes (think Fannie Mae, Freddie Mac, Lehman collapse, AIG cease-up in worldwide credit markets, TARP, etc.) are an exaggerated example that display this well.
On the topic of economic releases, there’s a textbook answer, and then how it actually works out in the wild: trading according to the former (what USD or whatever other currency ought to do) will leave you ceaselessly frustrated.
The truth is, anticipating how the market crowd will react to an economic release is very difficult. This is because each release, and each occasion of each release is approached with a different psychological market configuration. Is a print that surprises huge to the upside/downside already priced in, and if so, by how much? That will exercise a significant impact on the post-release response. A pertinent example: Is the US in a recession? Weekly continuing jobless claims may be closely watched, whereas it’s a much more trivial report during an expansion. Market sentiment is a fickle thing that is, again, very difficult to gauge in type and degree. This is why “trading the news” (not that you’re doing that, but you’ll certainly encounter people who are trying) without an institutional grade news feed, interbank spreads and loads of experience is a rollercoaster ride for most retail traders. The volatility and uncertainty around news releases generates what is called “event risk”.
There’s no ready guide for how one economy’s releases impact another economy’s native currency, that I know of, anyway. “Intermarket analysis” is an important discipline that looks across instruments and financial markets for insight, and is immensely helpful here because of how equities, bonds and commodities impact currencies and vice-versa. Something like the economic calendar at Fxstreet has notes describing the nature of an economic release and how a positive or negative reading should impact the local currency; but take all of that with a grain of salt due to what I’ve mentioned above.
Back to the beginning, risk aversion/appetite is the principal theme developing in and outflows in this market. The staple example, USD and JPY are currently recognized overall as safe haven currencies that experience positive flows when perceived risk ticks up, etc. GBP/JPY is impacted heavily for several reasons obvious and subtle (e.g. response in fixed income market plays a role), but the net result is that this pair is usually highly correlated to US equities and sensitive to economic developments in the US. CHF, CAD, AUD, EUR, NZD/JPY will often respond similarly, but not usually with the range or volatility found on the Guppy.
Understanding the general perception of the major economies that the market has will be very helpful for getting the directional bias that evolves as news comes out. Reading in the areas of intermarket analysis and macroeconomics are appropriate here. One recommendation I’d offer for a great overview would be John Murphy’s “Intermarket Analysis” text. I’m sure there’s plenty of other educational material on the topic offered by different trader/educators on their sites but I don’t know of any off the top of my head.
As long as your application isn’t trading the news based off of a simplistic “Since I think economic release A will print at X, currency pair C will move thus” heuristic, learning about this will serve you very well.