The big four: NFP, CPI, interest rates and GDP
Learning objectives
Describe what each of the four releases measures and why the market watches it
Explain why price responds to the surprise rather than to the number itself
Anticipate the trading conditions that appear around a high-impact release
Why these figures matter
Hundreds of economic figures are published every month. Four of them move markets more reliably than the rest, and they do so because they sit closest to the chain from What is fundamental analysis? lesson: data, then central bank expectations, then currency demand.
Employment and inflation are what most central bank mandates are built around. Interest rates are the decision itself. Growth is the backdrop against which all of it is judged.
The concept that explains everything
Before any scheduled release, the market already has a consensus forecast, and the current price already reflects it.
What moves price is the gap between the forecast and the actual number. The surprise, not the figure.
Make that concrete. Suppose consensus for a jobs report is 180,000 and the release comes in at 200,000. That's a positive surprise, and the currency may strengthen.
Now suppose consensus was 250,000 and the release is the same 200,000. Identical number. Now it's a substantial negative surprise, and the currency may fall.
Two hundred thousand jobs was created in both cases. The economy behaved identically. The market moved in opposite directions, because it was never trading the number.
This is why beginners find news reactions baffling. Good news sends a currency down, a rate cut sends it up, and none of it makes sense until you stop asking "was that good?" and start asking "was that better or worse than expected?"
NFP: Non-Farm Payrolls
The change in US employment excluding agricultural work, published monthly, typically on the first Friday at 13:30 UK time. Always confirm against the calendar rather than assuming.
What to look at. The headline jobs number gets the attention, but three figures arrive together and the other two often matter more:
- The unemployment rate
- Average hourly earnings, the wage component, which feeds directly into inflation expectations and therefore into policy
- Revisions to the previous two months, which can be large enough to reverse the meaning of the headline entirely
Character. Among the highest-volatility scheduled events in foreign exchange. It moves the dollar, and because currencies trade in pairs, it moves everything priced against the dollar.
CPI: Consumer Price Index
The standard measure of consumer inflation, published monthly.
Headline and core. Headline CPI includes everything. Core CPI strips out food and energy, which are volatile for reasons that have little to do with underlying inflation. Central banks generally weight core more heavily, so the market often reacts more to the core figure than the headline.
Why it matters. Price stability is the primary mandate for most central banks, as Central banks 101 (Fundamental Analysis) covers. Inflation coming in hotter than expected raises the probability the market assigns to tighter policy, which flows straight back down the chain from What is fundamental analysis? (Fundamental Analysis).
Character. In periods when inflation is the dominant policy question, CPI has been the single most market-moving scheduled release, ahead of employment data.
Interest rate decisions
The decision itself, announced on a scheduled date by the central bank.
Here's the counterintuitive part, and it's important enough that Central banks 101 (Fundamental Analysis) is built around it: the decision is usually already priced. By the time the announcement arrives, the market has assigned a very high probability to the outcome, often above 90%.
Which means the decision frequently moves price less than what comes with it. The accompanying statement, the updated forecasts, and the press conference all shift expectations about the next decisions, and those expectations are what currency valuations actually rest on.
A central bank can cut rates and the currency can rise, because the market expected more cuts than it got. Central banks 101 (Fundamental Analysis) explains why.
GDP: Gross Domestic Product
Total economic output, published quarterly, usually in a sequence of estimates: a first or preliminary reading, then revisions.
Character. Backward-looking and slow. By the time GDP confirms what happened last quarter, the market has usually inferred it from the monthly data that arrived first. It typically moves markets less than NFP or CPI, and the first estimate matters considerably more than the later revisions.
What it's for. Regime context rather than event trading. GDP tells you what backdrop you're operating in, which is exactly the use What is fundamental analysis? (Fundamental Analysis) described as achievable.
What actually happens at release time
This section is the practical one, and it's why How to trade news events later in this course exists.
In the seconds around a high-impact release:
- Spreads widen, sometimes to several multiples of normal, for the reasons How traders make money: bid, ask, spread, long and short (Markets 101) covered
- Liquidity thins as participants withdraw quotes rather than get run over
- Slippage affects both your entries and your stops. Stop losses: where to set them and why (Risk Management) established that a stop is a trigger rather than a guaranteed price, and this is the moment that matters most
- The initial move often reverses within minutes as traders read past the headline to the detail
- Margin requirements may be raised by the broker around scheduled events, as How to use a margin calculator (Trading Foundations) explained, so a comfortable position can suddenly need more
Every item on that list works against a retail trader specifically. That isn't a reason to ignore the calendar. It's a reason to use the calendar for protection rather than opportunity, which is what How to trade news events (Fundamental Analysis) argues.
Reading the calendar
Every economic calendar gives you the same fields: date, time, the consensus forecast, the previous figure, and an impact rating.
Three habits worth building, none of which takes more than a minute:
- Check the day's calendar before you trade. Every session, without exception.
- Convert times to your own timezone and know them, rather than working it out under pressure.
- Check whether an open position will still be open when a high-impact release lands, and decide in advance what happens if so.
That third one is where most of the value is. The problem is almost never a trader who knew a release was coming. It's a trader who found out afterwards.
Key takeaways
Price responds to the gap between consensus and actual, not to the number. The same figure can be a positive or negative surprise depending on what was expected
NFP carries three figures that matter: the headline, wage growth and revisions to prior months. CPI's core reading often moves markets more than the headline
Rate decisions are usually priced in advance, so the statement and press conference frequently move price more than the decision itself
Around releases, spreads widen, liquidity thins, stops slip and initial moves often reverse. The calendar is more useful as protection than as opportunity