How to read and use economic calendars in forex

Written by
Fact checked by
Adam N.
Updated
Apr 2023

An economic calendar is a list of scheduled national and international events and data releases organized in chronological order. It is a very important source of information for traders as the events it contains are likely to affect the price of financial assets and investor sentiment in a market.

The essence

  • An economic calendar lists scheduled events and data releases in chronological order
  • Events in an economic calendar may have a significant impact on the forex market
  • Forex traders regularly consult economic calendars to stay on top of news and developments
  • Economic calendars are crucial tools for monitoring volatility in the forex market
  • Using an economic calendar can help manage the risk of your forex trades

What is a forex economic calendar?

A forex calendar is an economic calendar that contains events and data publications that are highly relevant for foreign exchange markets. The events in a forex calendar will include events such as inflation and GDP data releases, interest rate decisions as well as speeches delivered by central bankers and key economic policy makers. 

These events can potentially have a dramatic impact on forex markets. An interest rate increase delivered by the Fed (the central bank of the US) will influence the exchange rate of the US dollar. If the rate hike is unexpected, the impact on the USD may be huge. 

Most economic calendars will have a short description for each event. For example, an inflation data release will have a scheduled publication time, the country of origin, and details of the data. You will see the figure from the last data release (marked previous or prior), the forecast (or consensus) which is the market expectation for the value of the data to be released and the actual, which is updated when the data is published. 

Some calendars will have extra features, such as events graded according to their expected market impact. This is usually done using a color-coded symbol (i.e. yellow, orange, and red bars indicating low, medium, and high impact) that indicates the importance of the released data for forex markets. 

The Internet is awash with free economic calendars but choosing one at random may not prove helpful. The usefulness of an economic calendar depends on how relevant the events included in it are to your selected markets and financial assets.  

Forex trading is a truly international endeavor, so choose an economic calendar where you can filter events based on country and currency. A calendar generally displays every economic item coming out of major economies. This is too much information, so you will need to customize your calendar based on the currencies you want to trade and according to your strategy. 

Most forex brokers provide an economic calendar on their trading platform and these are typically customizable.

Still haven’t found the forex broker of your dreams? Check out this regularly upgraded top list of the best forex brokers in the world, compiled by our brokerage professionals after testing their services with real money. 

How to use a forex economic calendar

Your primary objective in using a forex economic calendar is to stay informed about upcoming events. If you are a forex trader, you should check the calendar every day to help plan your trades and manage your risk.  

Here’s a practical example of how to use your forex calendar. Let’s say there is a data release coming up. You can compare the prior figure and the consensus to see whether the trend is getting better or worse. If, for instance, the prior figure for the eurozone inflation (consumer price index/CPI) was 5.9% and the forecast is 6.1%, the trend seems to be getting higher.

Keep a close eye on forecasts associated with data releases as a significant deviation of the actual figure from the forecast is bound to have a major market impact. If an inflation figure is much higher than the forecast, this will affect the currency as market expectations for a rate hike will increase. 

Economic calendars can help with risk management. If you know when a key economic event will take place, you can plan your trades around it and prepare yourself for potential volatility. You can also expect a period of market volatility around the time of key economic data releases: if the released data is above or below, or even in line with expectations, volatility can pick up. 

It is important, however, to keep a balanced approach to economic releases and not to overreact. Do not try to respond to each change in the market triggered by a news event/economic release, keep an eye on the underlying macroenvironment that determines the market for a currency pair. 

FAQ

How do you read an economic calendar? 

Most economic releases included in a forex calendar will have a short description of the event, the country of origin, and the publication date. The entry will feature the previous value of the released data, the forecast (which is the consensus expectation), and the actual figure, which is updated once the data is released. Some calendars will have a symbol (usually color-coded) that indicates the importance of the released data for forex markets as high, medium and low. 

How to trade an economic calendar? 

Forex traders use economic calendars for a variety of reasons and objectives. Here are some of the most important ones: 

  1. Learn about economic indicators
  2. Research the market and compare data
  3. Keep up to date with events and news
  4. Build an event-driven trading strategy
  5. Set up trading alerts  

 

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Further reading

Author of this article

Edith Balázs

Fiscal Fables Storyteller | Forex • Safety • Financial Journalism

I bring 20+ years of experience as a correspondent having worked for Bloomberg, Dow Jones and The Wall Street Journal covering macroeconomics, stock, currency and fixed-income markets. I hold a Master's degree in American Studies and Journalism.

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