For traders serious about the market, understanding charts alone is no longer enough. Behind every price bar and every sharp market swing, there are always "economic news" and "fundamental factors" driving them. This is why the term fundamental is so important, especially for news traders who constantly deal with volatility from global economic figures. If you want to start with the most impactful news like Non-Farm Payrolls, you can read more in-depth in the article "What is Non-Farm Payrolls? Why Traders Must Watch It," which is part of the same content series as this article.
What is Fundamental Analysis from a News Trader's Perspective?
Broadly speaking, fundamental analysis, or "fundamental factors," refers to economic, financial, and monetary policy data that tells us whether a country's economy is "strong or weak." Examples include GDP figures, employment, inflation, interest rates, manufacturing, services, and central bank statements. This information is used by institutional investors and central banks to assess the direction of the economy and currency values in the medium to long term (Investopedia)
However, from the perspective of news traders, fundamental analysis narrows its focus to "news and figures that the market must watch on a weekly and monthly basis," often highlighted in red or as High Impact on economic calendars, such as:
- U.S. Employment Figures (Non-Farm Payrolls)
- Consumer Price Index (CPI)
- U.S. Federal Reserve FOMC Meetings
- Purchasing Managers' Index (PMI) for Manufacturing and Services
Once you begin to understand what these news items mean and how they relate to the economy and currency values, your trading will no longer be just about guessing chart movements, but rather making decisions based on "economic reasoning."
Why News Traders Must Understand the Core Structure of Fundamental Analysis
For many traders, trading purely by looking at charts might seem easier and more comfortable. However, the problem is that on major news days, charts often swing wildly and seemingly without reason to those unaware of what's happening behind the scenes. Understanding fundamental analysis helps you:
- Not panic when prices swing, because you know what news caused it.
- Choose whether to "trade during the news" or "avoid the news and wait for the market to stabilize afterward."
- Better interpret the broader direction of currency values based on economic cycles.
Imagine you are trading a USD currency pair. Just minutes before the U.S. CPI figures are announced, spreads widen and volatility increases. If you don't know what CPI is and why inflation affects interest rates and currency values, you'll be more likely to make emotional decisions rather than planned ones. Conversely, if you understand and prepare in advance, you'll be better equipped to handle or avoid risks. You can delve deeper into the role of CPI in the article "What is CPI? Why Inflation Makes the Market Volatile."
Core Fundamental Factors News Traders Should Know
1. Inflation and CPI Figures
CPI (Consumer Price Index) is a consumer price index that measures changes in the prices of everyday goods and services for the general public. It is the primary figure used to measure a country's "inflation" (Investopedia). If CPI is higher than market expectations, the market will anticipate that the central bank may need to raise interest rates further to control inflation, leading to a stronger currency. Conversely, if CPI comes in lower than expected, the market might anticipate slower rate hikes or even future rate cuts, which could weaken the currency.
For news traders, simply looking at the actual figure isn't enough; it must be compared with "Forecast" and "Previous" values to assess how surprised the market will be. You can further explore the market's behavior during CPI news in the article "What is CPI? Why Inflation Makes the Market Volatile."
2. Monetary Policy and FOMC Meetings
The heart of fundamental analysis in the financial market is "interest rates," and the most important body setting interest rates globally is the Federal Open Market Committee (FOMC) of the U.S. Federal Reserve, which meets 8 times a year to determine the direction of monetary policy and the policy interest rate (Federal Reserve)
News such as "FOMC Statement" or "Fed Rate Decision" are red-box news events that can cause USD currency pairs, gold, and stock markets to swing sharply within minutes. What news traders need to watch includes:
- Interest rate decision (raise, hold, cut)
- Statement and tone (hawkish or dovish)
- Future interest rate projections (Dot Plot)
If you want to understand the FOMC structure in detail—who votes, when they meet, and how the market interprets their statements—it is recommended to read the article "What is FOMC? Why Fed Meetings are Crucial," which is part of the same Fundamental Analysis for News Traders series.
3. PMI Index and Economic Outlook
While CPI and FOMC news tell us "how hot or cold the economy is right now," news like PMI (Purchasing Managers’ Index) tells us "whether the future direction is likely to improve or worsen." This is because PMI is a survey sent to purchasing managers in various businesses, asking whether orders, production, employment, etc., are expanding or contracting (Investopedia)
Key values to remember are:
- PMI greater than 50 = Business sector is expanding
- PMI less than 50 = Business sector is contracting
When the market sees PMI decline for several consecutive months, investors may start to worry that the economy is entering a slowdown or recession, which can put pressure on that country's currency. Traders who understand fundamental analysis will see "early signals" from PMI before other figures confirm. For an overview of PMI's role in trading, you can continue in the article "What is PMI? The Figure That Points to the Economic Future."
4. Labor News – Non-Farm Payrolls and Unemployment Rate
Although this article focuses on an overview of fundamental analysis, it wouldn't be complete without mentioning Non-Farm Payrolls. NFP is one of the top news items watched by traders worldwide every month. This figure indicates the number of new jobs created in the non-agricultural sector of the U.S., reflecting the extent of employment expansion in the economy.
Generally, if NFP comes out significantly better than expected and the unemployment rate decreases, the market will view the economy as strong, supporting a hawkish interest rate policy. The USD currency tends to strengthen. However, if the figures are unexpectedly poor, the market might anticipate that the central bank will need to ease its hawkish stance, which could pressure the USD to weaken. For systematic details on interpreting Non-Farm Payrolls, you can follow up in the article "What is Non-Farm Payrolls? Why Traders Must Watch It."
How to Start Using Fundamental Analysis in News Trading Without Excessive Risk
- Start by "knowing in advance" what news is coming this week – Check the economic calendar to see if there's CPI, FOMC, PMI, or Non-Farm Payrolls news.
- Read the general economic context – Is inflation high or low? Is the economy expanding or slowing down? Are interest rates in an upward or downward trend?
- Set your own rules – Decide whether to trade before the news, during the news, or wait until after the news. For example, some choose not to open new orders 30 minutes before major news.
- Always use Risk Management – Reduce lot size during news events or widen Stop Loss to suit volatility, being prepared for increased risk.
- Keep a record – Note down every news trade and its outcome to refine your strategy in the future.
Conclusion: Fundamental Analysis is the Language the Market Uses to Communicate
Ultimately, fundamental analysis is the "common language of economics and financial markets." If you understand this language, you'll be able to decipher why the market moves the way it does, why investors fear one piece of news but not another, and why prices sometimes move contrary to our own feelings. For news traders, understanding fundamental factors is not an option but a core component of long-term survival. The more you understand crucial news like CPI, FOMC, PMI, and Non-Farm Payrolls, the more you will "trade with reason" rather than emotion, and you'll be able to systematically turn volatility into opportunities.
Sources
- Investopedia – Fundamental Analysis: Principles, Types, and How to Use It
- ThinkMarkets – Forex Fundamental Analysis: Definition, Drivers, Methodology
- Investopedia – What Is the Consumer Price Index (CPI)?
- Federal Reserve – Federal Open Market Committee (FOMC)
- Investopedia – What Is the Purchasing Managers Index (PMI)?