So far in 2023, there has been no shortage of market-moving news and economic data. Some of the biggest impact on trading comes not just from the list of scheduled economic data releases, but from socio-political and economic events that define the global economic landscape and shape the bias of the major market participants.
So if you want to make the best of the evaluation programs offered by True Forex Funds as a pathway to becoming a funded trader, it is essential you understand what kind of news will move the markets in 2023 and 2024, and how you can go about trading these news releases.
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News means opportunities
A reason why some traders outperform others, or are able to maximize opportunities where others cannot is because such traders have understood the macroeconomic global climate and are able to use the information to their trading advantage.
Trading off the macroeconomic climate enables you to trade with the flow of the institutional orders, increasing your chances of becoming a True Forex Funds funded trader.
You’ll need to:
- have some ideas about the potential changes to this environment as the year progresses.
- be able to understand the impact that alterations to the macroeconomic climate will have on various asset classes.
- know what assets to change in response to the data from high-impact news events.
- know what currency pairs, energy assets, indices and commodities to trade in certain given situations.
Overview of the global economic landscape in 2023
It has been three years since the pandemic struck. The pandemic presented some of the all-time best trading opportunities that the financial markets have ever seen. It was a time when central banks had to act to cut interest rates to near-zero and sometimes negative territory to save the global financial system from collapse. The excess cash from the stimulus programs created a situation where excess cash was chasing too few goods on the back of a global supply chain that was still stuttering.
Inflation kicked in
With inflation breathing down on their economies, central banks led by the US Federal Reserve had to start raising interest rates once more. Some of these apex banks have performed up to ten consecutive rate hikes, with the attendant effect of restraining economic growth. Having cut rates so aggressively in 2020 and followed it up with equally aggressive rate hikes, many central banks are considering pausing their monetary tightening. This in itself, has created new opportunities as interest rate futures traders place bets on their new rate expectations.
Apart from the expected shuttering of the monetary tightening policies of various central banks due to the fear of inducing recession, other developments have emerged in 2023. One of these is the US banking crisis, which has seen the collapse of three banks and several others in trouble. The contagion spread to Europe, and one of the most iconic banks of all time crumbled. Credit Suisse was bought out by UBS in a last-minute deal brokered by the Swiss government.
Projections that will Shape 2023 Economic News
Here are the major talking points for 2023 in terms of what will make the news that traders can act on.
- Many countries are now staring at potential recession as economic growth slows in the face of monetary policy tightening.
- Inflation is expected to moderate as the impact of the rate hiking cycle of 2022 kicks in.
- Central banks will start to reduce the scale of their rate hikes, or pause it entirely. We will start to see expectations of when central banks may commence rate cuts to stimulate economies that have slowed down too much.
- We will start to see a rebalancing of the labor market, with a slowing of wage growth and companies starting to cut hiring to match economic conditions. The slowing of wage growth will make less money available to chase few goods, resulting in a return of inflation to central bank targets.
The key economic indices that will command high volatility and will therefore be suitable for news trades include:
- Central bank actions (and expectations, including speeches by key central bank figures)
- Employment data
- GDP data
These will all have implications on some of the popularly traded economic news data, and will also impact several assets listed on the MT4/MT5 trading platforms where traders can engage in the TFF evaluation programs.
The discussion below will center mostly on the US fundamentals, which will impact the US Dollar pairs. However, extrapolations can be made in some cases for other currencies as well.
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Slowing Inflation rate
Inflation is expected to continue cooling in the second half of 2023, following the pattern already seen in the first half of the year. This will be driven by a rebound in the supply of goods after a season of scarcity created by pandemic-era supply chain disruptions and the war in Ukraine. Later on, a reduction in wage growth is expected to take some pressure off the demand side of the equation. The key economic data to trade would be:
- a) Consumer price index (core and headline, especially the annualized figure).
- b) Core PCE Price Index (used by the Fed as a barometer for physical goods inflation)
The Producer Price Index does not produce the kind of price response we see in the CPI data. It only helps to reinforce the latter since it is released a few days later.
Central Bank Actions
We are gradually shifting towards the stage where central bank actions in slowing down the pace of rate hikes or pausing them entirely will be the new wave of market expectations. Although seen to be an extreme possibility as of the time of writing in mid-2023, we may also start seeing the markets throwing up expectations of potential rate cuts as recessionary fears emerge.
Also of importance will be the comments made by members of the boards of central banks, especially those of the Federal Reserve (so-called Fedspeak). These speeches drive market expectations and usually exert a volatility pull on affected currencies.
There are several aspects to employment data which will become market-moving information and which you need to be aware of. One aspect which will become important would be wage growth data.
Wage growth and changes in employment numbers would be inherently tied to GDP growth. Softer GDP growth is a consequence of recessionary pressures, driven by the strong rate hikes seen in 2022. This softening will create a decline in job openings, causing a rebalancing of the labor market.
An effect of such rebalancing is a softening in wage inflation, which is a drop in the average wage growth numbers. Wage growth information is also a pointer as to when inflation data will return to pre-set targets. This information is also useful in deciding the direction of trades that aim to capture interest rate direction. When looking to trade employment data, pay attention to the wage growth data as well before taking positions.
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We expect GDP data to become important data sets to trade for the rest of 2023 and into 2024. This is a result of the correlation between economic growth and recessionary pressures created in high interest rate environments.
Wage growth and changes in employment numbers would be inherently tied to GDP growth. Softer GDP growth is a consequence of recessionary pressures, driven by the strong rate hikes seen in 2022. The question for traders to answer is whether central banks feel that there has been enough monetary policy tightening to keep GDP growth slow enough to rebalance the labor market. This is another driver of interest rate expectations.
Market Impact of Upcoming News Events
There are several assets listed on the MT4 and MT5 platforms available for trading on the TFF evaluation program. Each of these assets will be affected in some way by these upcoming market risk events. How will these upcoming news events impact the various asset classes?
The USD pairs are almost always impacted whenever there is a news event involving the Federal Reserve, Fedspeak, GDP data, the Non-Farm Payrolls and other market-moving US data. The US Dollar also plays a pivotal role as a safe-haven currency, which is important in risk-on, risk-off market situations. You must also take note of the commodity-linked currencies (Canadian Dollar, Mexican Peso and Norwegian Krone for oil, Aussie Dollar for gold) and how they respond to the price of their linked commodities.
The most important pairs are EUR/USD, GBP/USD, USD/JPY (Non-farm Payrolls), USD/NOK (oil price reactive), USD/ZAR (carry trade), USD/CHF (risk-on, risk-off).
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The following commodities are good to trade the current and upcoming situations in 2023:
Copper, and to a lesser extent platinum and palladium, are metal commodities that are risk-associated. They tend to do well in inflationary environments when interest rates are rising. After the worst of the pandemic, these assets began to trend upwards. But as inflation has cooled and interest rate increases are now tapering off, we are starting to see a weakening in the prices of copper, palladium and platinum.
Gold, on the other hand, is seeing a surge. The recent surge was driven by the US banking crisis, pushing investors to seek safe-haven assets. Goldman Sachs has predicted a price of $2,300 in 2023 for gold. In the last two months, the price of gold has climbed from $1,850 to around $2000 and is well on track to maintain the trajectory set by Goldman Sachs. Expect a lot of volatility as the yellow metal inches its way towards this price target.
US Stock Indices
The US stock indices (Nasdaq 100, S&P 500, Dow Jones 30) are very sensitive to the current macroeconomic climate. They will provide opportunities for traders who want a more clear-cut response to some of these risk events. For instance, stock indices typically do well in low-interest environments as there is cheap money for borrowing to purchase equities. That is why the Dow and Nasdaq hit record highs after the pandemic response stimulus programs were introduced. As soon as the Fed started to hike rates, the stock indices began to plunge because borrowed funds became more expensive, and the rising yields made bonds more attractive than stocks, pulling investment capital away from the equities markets.
With central banks now indicating that it may be time to either reduce the scale of rate hikes or pause them entirely, we may be entering into a new phase for the stock markets. Trading the stock indices is a good way of benefitting from the situation.
Trade the Nasdaq 100 (US100), Dow Jones (US30) or S&P 500 (US500) index assets on the TFF evaluation/funded trader programs with enhanced capital to take advantage of the potentially profitable opportunities.
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The major impact on the energy markets in recent months has been driven mostly by the war in Ukraine, as well as demand-supply dynamics as captured in the Organization of Petroleum Exporting Countries (OPEC) monthly quota settings. You can also look at the global demand forecast reports issued monthly by OPEC and the International Energy Agency (IEA) as these play a huge role in directing the macroeconomics of the global energy market for months at a time.
The True Forex Funds Advantage
All these opportunities mentioned above will mean very little if you continue to trade with small capital. True Forex Funds access to capital up to $400,000 and you can trade with spreads as low as 0.0 pips.
Enjoy these benefits while trading with True Forex Funds:
- There are no restrictions on what you can trade. You can trade any of the assets mentioned in this article.
- You are allowed to keep positions open overnight.
- News trading is allowed, which is a huge benefit that allows you to profit from macroeconomic data.
- Your registration fees are fully refundable with your first profit split.
- The drawdown rules are not as stringent as with other prop firms.
- There is an opportunity for you to scale up your earnings by getting up to $2,500,000 in capital.
The profit split on funded accounts is 80/20, giving you the chance of retaining 80% of all profits you have made.
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Can I trade the news with the TFF evaluation programs?
Yes, news trading is allowed.
Am I allowed to use my EAs when trading on the TFF platform?
Yes, EAs and bots are allowed. Any expert advisor that is trading according to real market conditions is welcome by True Forex Funds. Otherwise, it’s not.
How many assets can I trade?
True Forex Funds works with a brokerage that provides more than 130 https://trueforexfunds.com/assistance-post/available-instruments/assets that are made up of currencies, cryptocurrencies, metals, energies, stocks and indices.
Can I invest $100 in forex?
Yes. With $100, you’ll have access to a $10,000 account on True Forex Funds, which is a much healthier account option that gives more freedom and flexibility to manage your trading account without overleveraging on a small capital, thus giving you a boost in institutional returns.