US GDP number

What sort impact does it have on USD? I was thinking that good GDP numbers will result in stronger USD but apparently upon reading an article it doesn’t appear so.

Also, I’ve been observing GBP/JPY the last few days. Two days ago there was a worse than expected numbers for US durable goods order and I noticed a short spike in the GBP/JPY before driving the pound higher. Then yesterday after US jobless claim data was released which was about the same number as the previous month, it also drove the GBP slightly higher against the JPY. I’m not sure whether it was just a coincidence. If it’s not, I wonder why US data is affecting GBP/JPY pair.

Anyway, is there any guide as to which news will also affect a certain currency other than its own? Is there a general rule of thumb to deal with the positive/negative result?

I’ve been reading quite a lot on technical analysis and now I’m venturing into the fundamental side of it. Thanks to anyone who can shed some light into this. :smiley:

Ok. Now take this with a grain of salt because this is only what I have perceived since learning forex.

Because the USD is a safe haven currency, when other currencies/countries have problems, their currency goes down against the USD because people are scared and run to put their money in the safest place…which is the USD.

When other currencies have figures that are good, this also increases their value against the USD, because it is still a good buying time.

Now, when good USD numbers come out, from what I understand this means that more people are willing to take riskier currencies because people don’t see the need to keep their money with a safe currency.

When bad USD numbers come out…well then people run away from the USD I think because it reflects poorly on the country and thus a bad investment.

But remember…this is just what I’ve picked up while reading babypips everyday.

Here’s my two cents…

As of late, say around the start of the year… The FX market started to be heavily influenced by degrees in risk appetite. The thing is, the US is the largest economy in the world and investors, economists, analysts, etc use the US as a benchmark for global recovery.

When the US comes out with POSITIVE data/better than expected/less bad data, the US suddenly sells off. Investors/traders believe that since the US is starting to pick up, other countries will follow as well… So, naturally everyone wants the “biggest bang for their buck” so they buy up higher yielding currencies such as the AUD, EUR, etc.

When negative US data comes out, they suddenly realize… “oh thing’s aren’t as rosy as they seem so I’ll hold on to safer assets such as the USD. Since this is the largest economy in the world, I can’t go wrong!” Risk appetite fades and risk aversion sets in…

The best recent example I can think of is when China’s stock market dropped 5% last Wednesday. The Aussie dropped sharply and traders bought up the USD. See how they just rallied towards the safety of the USD when things didn’t go so well.

I guess… we’re at unprecedented times… and the “typical market reactions” aren’t really followed anymore.

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.

Great explanation and very informative, thanks!

Well the dollar and the yen gained quite a lot of pips after the news released. I was thinking the price would reverse at the end of the first 15 min candle but I was wrong. :stuck_out_tongue:

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.

Thanks for the book recommendation but I don’t think I can get the book, especially not in the non English speaking country I am in now. :smiley:

Any recommended site to look for economic news? I usually googled them but doesn’t seem very effective.

…Not to mention having to contend with revisions to previous months.

Just look at today’s GDP number where the Q3 numbers were better than expectations by 0.5% , but Q2 was revised down by 0.9%.

I can understand the attraction of news trading with big moves in short periods of time, but some of these reports are just so risky. I will leave it to those braver than I.

Around 30-60 minutes after the better than expected US GDP number… the US lost ground versus other major currencies… Risk appetite, maybe? :smiley:

As for news…

bloomberg, reuters, freshpips.com (from pipcrawler’s blogposts) and daily pfennig for some opinionated commentary :smiley:

Today the US personal consumption were worse than expected�
The personal consumption in the US measures the quantity of money spent in a month by consumers.

The data was worse than expected and, as a result, the dollar is climbing due to its demand as a safe haven� risk aversion :smiley:

As for Bloomberg, it is of course very good, but kind of boring� it used to present news more interesting� don�t you think?