During important economic announcements, there is often extreme volatility in the market and brokerage firms tend to widen their spread, which increases your trading costs, could hurt your bottom line, and, ultimately, could make your trade targets harder to achieve. Next, in attempting to trade the news, you could also get “locked out” by your broker.
This happens when your have executed a trade at the correct time but the order takes sometime before you can see it in your trading platform. Clearly, this denies you the opportunity to make any necessary amendments suppose the trade goes against your initial projection. Imagine if your order fails to show up in your trading platform for a few minutes then, in fear, you enter another trade… Your risk could be two times as much now!
Lastly, trading major economic news makes you to be at a high risk of experiencing slippage. During such events, currency prices tend to move very fast due to extreme volatility in the market; therefore, slippage takes place when the price at which you planned to execute a trade is different from your actual transacted price because your order has been filled at a far different price.
This is the biggest predicament with placing stop or market entry orders because most often they are filled at an entirely different price from the one you had intended; sometimes past your profit target or stop loss, which increases your risk per trade.
Major economic news is important in the Forex market because it is the fuel that moves it. Thus, proper analysis of the Forex fundamental variables can prove to be of great benefit to your trading. Nonetheless, always remember to “buy the rumor but sell the fact.”
According to the forex news calendar the GBP has continued to make slight losses on the USD on the back of Eurozone debt problems. The consumer mood has significantly deteriorated as people begin to assess their future in light of the changing alignment of power economies. The sales report from UK reported a 0.2% m/m fall.
The August decline was 0.6% m/m. This is a reversal of the previous increments. The retail sales are not providing the boost which many politicians had hoped for. Rioting is just one of the factors that have been blamed. Shops were losing money and business. London is also in danger of losing its valuable place as a premium tourist destination on account of security concerns.
Economies that fail to boost the forex markets
Income levels in the United Kingdom continue to fall. The biggest fall yet has been suffered in three decades. Consumers will naturally try to hang onto their GBP. Spending is one of the critical engines of economic growth in the absence of a viable manufacturing base. It is from this perspective that the GPB has fallen 0.04% when compared to the struggling USD.
The forex news calendar now turns to the JPY which has extended its slight losses against the US Dollar. The Bank of Japan might be forced to intervene in order to protect the vested interests within that economy. A strong currency is not necessarily in the interest of the export market because it makes the products uncompetitive in the global environment.