FOREX THEORY
Market Expectations to News
and Their Impact on Currencies (Part 2)
Consensus Market Expectations
A consensus expectation, or just consensus, is the relative
agreement on upcoming economic or news forecasts. Economic forecasts are made
by various leading economists from banks, financial institutions and other
securities related entities.
Your favorite news personality gets into the mix by
surveying her in-house economist and collection of financial sound “players” in
the market.
All the forecasts get pooled together and averaged out, and
it’s these averages that appear on charts and calendars designating the level
of expectation for that report or event.
The consensus becomes ground zero; the incoming, or actual
data is compared against this baseline number. Incoming data normally gets
identified in the following manner:
“As expected” – the reported data was close to or at the
consensus forecast.
“Better-than-expected”– the reported data was better than
the consensus forecast.
“Worse-than-expected” – the reported data was worse than the
consensus forecast.
Whether or not incoming data meets consensus is an important
evaluation for determining price action. Just as important is the determination
of how much better or worse the actual data is to the consensus forecast.
Larger degrees of inaccuracy increase the chance and extent to which the price
may change once the report is out.
However, let’s remember that forex traders are smart, and
can be ahead of the curve. Well the good ones, anyway.
Many forex traders have already “priced in” consensus expectations
into their trading and into the market well before the report is scheduled, let
alone released.
 Consensus Market Expectat...){kind=link}
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