The currency (forex trading) market is the largest financial market in the world and is a market traded by a diverse range or participants, from private investors to central banks.

Forex traders will use a variety of methods to help them analyse and make decisions as to the health of one currency against another. Those forex traders who make their decisions based solely on economic releases and announcements are known as news traders.

Economic releases, especially those that surprise anaylsts whether negatively or positively often have an almost instant influence on the relevant country’s currency.

Let’s look at an example. On 16 August the pound continued to slowly climb against the dollar largely thanks to negative data out of the US. Both the Empire State Manufacturing Index and the NAHB Housing Market index missed analysts expectations.

It was only a slow climb as investors were nervous about the next day’s inflationary report; with UK inflation nudging lower to 3.1% in July, the figures were still outside of what was forecast by the Bank of England (BoE) but generally well received. Attention then turned to the release of the latest BoE monetary policy committee minutes on Wednesday. Evidence of a spilt in opinion on the last decision made about the quantitative easing programme might create a certain amount of negative sentiment.

On the morning of the announcement the pound fell to a three-week low against the dollar. As it turned out, the minutes revealed that the MPC had voted unanimously to not further its QE programme and the pound jumped back in value against the dollar.

CFD trading can be a great way of taking a position on the world’s currencies, it gives the opportunity for the individual to test their judgement as to the future direction of a financial product.

IG Markets, according to market researchers Investment Trends, is the UK’s leading CFD provider. IG Markets provides an extensive range of tools and services to suit all trading styles,  including Reuters feeds, market analysis, professional charts and specialist seminars.

It is worth noting that while CFD trading can result in maginified profits it can also result in similar losses too, so make sure you understand all the risks involved.

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