The Impact of Information in Forex Market


The unregulated and global nature of the forex market tends to make trading on insider information very unlikely compared to how trading is conducted in the stock markets.

Basically, insider trading in the truest sense of the word does not really exist in the forex market, and even retail traders can compete on a fairly level playing ground when it comes to the availability of forex market information.

The Availability of Information

In general, the level of information required to trade forex usually comes from relatively open government sources for fundamental analysts or from the price action itself for technical forex traders. As a result, it tends to be readily available to just about anyone in the world in the modern information age.

The primary exception to the general open availability of information in the forex market tends to be market flow information. This includes the execution of large trades and substantial orders in the forex market to which only the parties to the major transaction tend to be privy.

The Effect of News on the Forex Market

Despite the aforementioned exception of order flow information, most traders in the forex market get their information from the same sources. These sources release economic data and other information pertinent to the forex market to the general public on a schedule that is generally known in advance.

World news can also affect currency markets, although this information may vary in its impact on currencies and may have different implications for the currency markets depending on the nature of the news.

For example, a sharp rise in the price of crude oil could negatively the affect the USD/CAD exchange rate. This would occur since Canada is an oil producing nation while the United States is a net oil importer.

Basically, the type of news which currencies tend to react to is readily available to just about anyone with access to the Internet and the knowledge about how to obtain it.

The news information and technical data that is now largely available for free online today once cost thousands of dollars a month to obtain from the same news organizations such as Reuters and the Associated Press.

Economic News Which Affects Currencies

Certain fundamental news items about the economic state of a country will tend to directly affect trading in that country's currency. The most important economic numbers to watch that can affect a currency's value include:

Gross Domestic Product (GDP) - measures the total goods and services produced in a country, and changes measure a country's growth.

Retail Sales - A measure all the goods sold at the retail level that gives an indication of the level of spending in the economy.

Consumer Price Index (CPI) - measures the change in the price of a basket of goods and thus provides a way to assess inflation.

Trade Balance - measures the amount of imports versus the amount of exports of a country.

In addition to the above economic indicators, key employment reports and other important indicators of a nation's economic health and the future direction of interest rates will tend to affect the valuation of the country's currency.