The relationship between currency prices and news releases can be interesting. It’s not always a simple case of the price moving in one direction after the news hits. Here’s what can happen:
- Price movement before the news: Often, the currency price will start to move ahead of the news release. This is because traders anticipate what the news might be and position themselves accordingly. There’s a saying in forex trading: “Buy the rumor, sell the fact.” This means that if a positive economic report is expected, traders might buy the currency before the report is released, causing the price to go up. Then, when the report actually comes out and confirms the positive news, the price might not move much, or it could even go down slightly, as some traders who bought earlier lock in their profits by selling.
- Reaction to the news: When the news is released, the currency price can react in a few ways:
- It moves in the direction that was anticipated. For example, if the positive economic report is confirmed, the currency might strengthen further.
- It moves in the opposite direction. This can happen if the news is already priced in, or if it surprises the market in a negative way.
- It doesn’t move much at all. This can happen if the news is not very important, or if it’s in line with expectations.
So, the currency can definitely move before the news is released, and the news itself can trigger further movement, but the direction of that movement isn’t always straightforward.