An economic calendar is widely used by investors to track market-driving events, including political and economic policy decisions and other economic indicators. Market-driving events, which tend to be formally released or announced in some form, carry a significant likelihood of affecting the global economy. Accordingly, they demand great attention from traders and investors. Nevertheless, there are some fundamental issues regarding the use of this instrument that need to be examined.
Most importantly, it is a useful device to facilitate trade in the secondary market. While it does not provide any information on the domestic or national level, it does help traders and investors to determine the movement of interest rates. The existence of a consistent increase or decrease in the rates over a certain period of time, for instance, indicates the direction of monetary policy. Similarly, an increase in the trading volume, which can be seen in an economic calendar, can be interpreted as a signal of investor confidence in the domestic economy.
There are three major economic calendars used by traders and investors around the world. The first one, the FOMC GDP of the U.S., is released approximately two weeks before the release of the final reading of the national income statement. In the same period, the producer price index (CPI) measures the cost of certain goods and services offered by different companies. In addition, the wholesale price index (WPI) indicates the price of all manufactured goods, including those sold directly by manufacturers. Lastly, the Purchasing Managers Index (PMI) considers the overall supply of labor, capital, and material and compares it with overall demand.
The various economic indicators included in the FOMC’s economic calendar are essentially the same worldwide. However, some elements of the data points obtained from these indicators may be altered due to political developments and natural disasters that may affect the supply or demand of certain elements in the economy. When these changes occur, these changes are reflected in the FOMC’s reports for the following month. At the end of the year, the FOMC releases data for its annual inflation estimate, employment growth, and other economic indicators.
Other elements in the economic calendars are widely used by financial institutions to determine the strength of the economy. These elements, also called indicators, are commonly used by traders and central banks to decide whether to intervene in the market to make an intervention. Some examples of these indicators are the balance of trade gap, interest rates, inflation, unemployment rates, and consumer price index (CPI). The stop-loss indicator is usually considered the last resort for a trader or a central bank, because it is the primary means of determining potential losses. The stop-loss level is typically determined based on the levels of prevailing market volatility, which can be affected by external variables such as weather conditions and news events.
The use of economic calendar indicators is also necessary in the determination of monetary policy, because the direction of the economy is often affected by external factors such as economic news and the state of the global economy. One of the most cited reasons for this is that market participants anticipate the release of economic calendar indicators which will indicate a milder outlook for the economy following the release of such information. This means that the release of indicators may have little or no effect on the FOMC’s decision to increase the federal funds rate or to keep the interest rate on the benchmark deposit rate below a certain level. Market participants thus continue to wait for the release of such reports in order to forecast the movement of interest rates and the level of monetary policy.
Market participants also use economic calendar indicators to analyze the movement of raw materials, inventories, and labor and capital assets. They use data points collected from the reports in order to assess the progress of operations and to make adjustments to their production process if need be. For example, if they see that wholesale inventories are increasing but the production is leveling off, they will consider the possibility that the increase in wholesale inventories could be offset by lower production. Similarly, if they see that manufacturing productivity is falling but the demand for manufactured goods is increasing, they might conclude that increased productivity could be offset by lower demand.
By using an economic calendar, a trader can better understand the relationship between domestic and international events and their effects on monetary and credit markets, currency rates, and interest rates. This knowledge allows traders to adopt appropriate measures to make more money and avoid unnecessary losses. A trader who understands the link between indicators and the movement of key economic indicators can thus facilitate better decision-making regarding monetary and credit policies and help minimize risk. It also helps the trader to establish which events have the biggest impact on market performance and thus makes it easier to implement measures designed to mitigate risks.