Saturday, October 17, 2015

Top 5 Most Market Moving Indicators For The USD

In this report, we examine the 5 most market moving indicators for the US dollar (we update this report annually) against the Euro.  The reason for our focus on the EUR/USD is its status as the most actively traded - and therefore benchmark – currency pair.

Economic Data is Important for Both Fundamental and Technical Traders

It is irrefutable that news or economic data can elicit a sharp reaction from currencies and other financial markets.  However not all economic data is created equal. The monthly Non–farm payrolls for example has had a far bigger impact on the US dollar than other perennial top market movers like consumer prices.  Indicators rarely keep their same level of influence over a currency though; so it common to see major shifts in the top ranking from year to year.

For example, over the past year, the worst contraction in the US housing market in a quarter century has led indicators like new and existing home sales to crowd out top releases from previous years – like ISM manufacturing.  Also, what may create a lasting move in a currency on a day to day basis could be different from what triggers a knee jerk reaction in the US dollar.

The top 5 most market moving indicators for the US dollar on a day to day basis are:

1. Non-Farm Payrolls 
2. ISM Non-Manufacturing
3. Personal Spending
4. Inflation (Consumer Price Index)
5. Existing Home Sales

Unlike the other numbers, the non-farm payrolls report consistently topped the list of most market moving indicators for the US dollar.  As the US economy slowed in 2007 and into 2008, the stability of the labor market was closely watched by all traders and analysts because of its broad ramifications for the overall economy.

What’s In Store for the Future

While it seems that day to day news is slowly having a smaller impact on the US dollar, the top market moving indicators will still have their impact on both technical and fundamental trading. The market is highly sensitive to surprise releases from many of the more fundamentally crucial economic releases.

What’s more, the cooler response to scheduled indicators over the longer term will not last. Interest in fundamentals historically goes through peaks and troughs depending on the presence of exogenous event risk. As risk in credit and other markets tempers, market participants will be more willing to take on speculative risk and respond to the ever evolving fundamental docket.

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