Technical analysis studies the chart; fundamental analysis asks why the chart moves. In forex the answer usually comes down to one thing: what central banks do with interest rates, and what the economic data tells them to do next. This guide explains the drivers that matter, how to follow them on an economic calendar, and two real episodes that show the effect on price.
Interest rates: the main driver
Money tends to flow towards the currency that pays a higher interest rate, or is expected to soon. So the most important fundamental in forex is not a single number but the difference between two central banks’ policies, and above all the market’s expectations for them. A currency often moves when expectations change, before the rate decision itself.
The central banks to watch first are the US Federal Reserve (Fed), the European Central Bank (ECB), the Bank of England, the Bank of Japan, the Swiss National Bank and the Reserve Bank of Australia. Each publishes its meeting dates in advance; for example, see the Fed’s FOMC meeting calendar.
The economic reports that move currencies
| Report | What it measures | Why traders care |
|---|---|---|
| Inflation (CPI) | How fast consumer prices rise | High inflation pushes central banks to raise rates |
| Employment (e.g. US Non-Farm Payrolls) | Jobs created and the unemployment rate | A strong labour market supports higher rates |
| GDP | Total economic output | Shows whether the economy is growing or shrinking |
| PMI surveys | Business activity, monthly | Early signal of growth before GDP is published |
| Retail sales | Consumer spending | Consumption drives a large part of growth |
What moves the price is the surprise, not the number itself. Every report on an economic calendar shows a forecast; if the actual figure is far from it, the currency reacts, often within seconds. That is why spreads widen and stops slip around big releases, as explained in our guide to trading costs.
Real case 1: the Fed and the ECB in 2022
- On 16 March 2022 the Fed raised its policy rate for the first time since 2018, by 0.25% (Fed press release, 16 March 2022), and followed with larger 0.75% increases later in the year.
- The ECB did not start until 21 July 2022, with a 0.50% increase that ended eight years of negative rates (ECB monetary policy decisions).
- With US rates rising faster and earlier, the euro weakened: euro futures went from about 1.22 in June 2021 to their first close below 1.00 on 22 August 2022 and a low of 0.9552 on 28 September 2022.
- As the ECB kept raising rates and the market expected the Fed to slow down, the gap narrowed and the euro recovered to about 1.09 by June 2023.
The lesson: the trend followed the change in the interest-rate gap and the expectations around it, over months, not a single headline.
Real case 2: the Swiss National Bank, 15 January 2015
For three years the SNB had capped the franc with a minimum exchange rate of 1.20 francs per euro. On 15 January 2015 it removed that floor without warning and cut its deposit rate to −0.75% (archive at snb.ch). Swiss franc futures, which had closed at 0.9817 the day before, closed at 1.1484, a 17% jump in one day, after trading as high as 1.2282. Many traders and even some brokers suffered losses far beyond their stop-losses because prices jumped over them.
The lesson: fundamentals also create gap risk. A stop-loss limits normal losses but cannot guarantee a price in a shock, which is one more reason to keep leverage moderate; see our guide to leverage.
How to use fundamentals in practice
- Check the economic calendar every week and mark the high-impact events for the currencies you trade.
- Know where each central bank is in its cycle: raising rates, cutting or on hold.
- Use fundamentals for direction and timeframe, and technical analysis for entries and stops.
- Avoid opening new trades just before major releases unless your plan is built for news; reduce position size if you hold through them.
Frequently asked questions
Is fundamental analysis better than technical analysis?
They answer different questions. Fundamentals explain the direction over weeks and months; technical analysis helps with timing. Most traders use both.
Which economic report moves forex the most?
Central bank rate decisions and the statements around them, followed by inflation and employment data, especially from the United States.
Do I need to read the full reports?
No. Start with the calendar: the forecast, the actual figure and the previous one. Over time, read the central bank statements, which explain what the data means for rates.
Forex and CFD trading on margin is high-risk and most retail traders lose money. Past examples do not guarantee future results, and nothing here is financial advice.