Economic Data

Central banks do not function in a vacuum and generally observe economic data to make their determination if interest rates need to change. Robust growth will usually be a precursor to increasing interest rates which contraction will lead to lower rates.

Economic data can be followed by monitoring and economic calendar and following the results after they are released. Generally, currency markets value all the current available information into the exchange rate, and fluctuate with new information. Economic data releases such as employment, inflation indices and growth will drive volatility.  

The type of information that will alter the course of a currency pair is information that is different than what is expected. Usually prior to an economic release, economist will report their expectations based on data that they have evaluated. When the economic report is different than the average of what economists had expected, market volatility will take place.