The Call Option

economic data 

we know how to use an economic calendar (which should be checked daily), what are the market movers that usually generate the most volatility and, in some cases, opportunities?
a) Central Bank Meetings: it is not a wise thing to trade around a central bank meeting. But central bank meetings can set the tone for the days ahead, which can be traded on the back of the theme (if there is one). Central banks set the price of money by controlling the short term lending rate. Generally speaking, when a central bank increases interest rates it attracts capital to the country because investments will yield more. This is all positive for the domestic currency. The opposite is also true: if a central bank decreases interest rates, then it is negative for the domestic currency.
But even more important than the interest rates themselves is the general direction of interest rates. If a central bank is pointing at rising rates, then the market will already be in “buy the dip mode”. Another important factor, in this day and age, is the amount of alternative accommodative policies (like Quantitative Easing in its various forms), which increase the money supply and thus are negative for the domestic currency.
b) Central Bank Minutes: it is generally not wise to trade around the minutes of a central bank meeting, although these can provide valuable details as to the central bank's members' true policy direction and preferences. The minutes can confirm or contradict the actual decision taken previously.
c) Employment Reports: it is generally not wise to trade right before employment reports and definitely not around NFP. Employment reports are important because jobs create income which turns into spending and thus into GDP growth. The monthly US NFP report is the most volatile news release in the FX markets. In Europe, the most highly watched is the German jobs report.
d) PMI & ISM: The Purchasing Managers Index and the Institute of Supply Management survey the corporate purchasing managers in the economy and therefore provide a good “feeling” of the strength/weakness of the economy. In addition to watching the composite number (above or below 50), the sub-components can be used to gauge the strength/weakness of any sub-sector like jobs, orders, warehouse stocks, etc. These data prints can lead to tradable market reactions.
e) Retail Sales: yet another important data print. Consumption spending makes up to 70% of the GDP and therefore consumer demand is fundamental for the health of the economy. The general trend in retail sales can often be more important than the headline number, because of cyclical factors (Christmas, Easter, Weather, etc). Retail Sales can lead to tradable market reactions.
f) Consumer Confidence/Economic Confidence surveys: The volatility is usually much lower than other releases. Confidence reports are a “sentiment” indicator built by economists. After all, without confidence there is no spending or investing, and there is no growth. In export driven economies like Japan, Canada and Germany, these reports are watched closely. These data prints can lead to tradable market reactions
g) Consumer Price Index (CPI): Controlling inflation is generally the prime objective of the central banks. Therefore, inflation data is directly connected to monetary policy. Higher inflation generally pushes the domestic currency higher, on the back of the expectation of rising interest rates. The opposite is also true: softer inflation data is generally negative for the domestic currency, as the central bank might have to lower rates. These data prints can lead to tradable market reactions.