Three key numbers for currency spread betters

By Deputy Editor Tim Bennett Aug 25, 2010

Tim Bennett

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Every currency spread better wants to know the golden secret that will make them rich fast. Shame life isn't that easy! However, here are three numbers that are well worth watching. But be warned – you'll need to be quick off the mark. Professional investors often have faster electronic links to the currency markets than you do trading via a retail spread-betting broker.

US non-farm payrolls

Some numbers matter more than others. For example, anyone watching the US dollar exchange rate (against virtually any other currency) needs to keep a sharp eye on the non-farm payrolls figures. Any sign, for example, that US employment is dropping sharply can send the dollar plummeting – and fast. So a down bet on a US dollar currency pair ahead of poor non-farm payroll numbers should make money.

Interest rate and money supply announcements

The price of a currency is heavily influenced by the interest rate on offer. Rising interest rates make the currency more attractive to investors – that tends to drag money in and pushes the rate up. Again the trick is to be quick. So keep an eye on all news that relates to interest rates for your chosen pair. Often, by the day an announcement is actually made, it's already 'in the price'.

Also, watch out for news on 'quantitative easing'. Without going into the technical details, this is money printing. The more, say, dollars there are free to roam around the global economy, the cheaper they become relative to a more tightly controlled currency. So a big QE push from the US Treasury will tend to weaken the US dollar, and vice versa.

Inflation data

In the UK, the Bank of England has a remit to monitor CPI inflation. Any sign that it might take off should see the base rate rise to counter it (the logic being that if the base rate rises, so does the cost of servicing a variable rate mortgage or personal loan. That means you have less money every month to spend on anything else, which will tend to depress demand and therefore prices). A CPI spurt such as the one the UK saw recently will tend to push up sterling against other currencies.

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Published in Spread betting explained | More articles by Tim Bennett

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