MDS / LEARN MACRO
Understand the cause.
Build a scenario.
SIX PRACTICAL LESSONS
Understand the drivers.
Build your market view.
01 / ACTUAL & FORECASTReading a release: actuals versus expectations
Markets assess not just whether a figure is strong or weak, but how much it changes expectations already priced in.
Open lesson
How to read it
- Check the country, reference period and units. CPI m/m and CPI y/y answer different questions.
- Compare Actual with Forecast, then check Core, report components and revisions to Previous.
- Check whether the expected policy path changes. Currency and yield reactions help assess whether the market accepts that interpretation.
Illustrative example: CPI of 0.4% versus a 0.2% Forecast is a surprise of +0.2 percentage points, not +0.2%. If Core also exceeds expectations, the case for persistent price pressure is stronger.
Conclusion: which part of the report surprised the market and why it matters for the central bank's next decision.
02 / POLICY PATHCentral banks: the decision and the path ahead
An unchanged rate can accompany a new policy direction. Compare the decision with expectations and guidance on future meetings.
Open lesson
How to read it
- Separate today's policy rate from its expected path over the coming months.
- Read the statement, projections and press-conference answers. What does the central bank consider the main risk?
- Compare the new policy path with the other currency in the pair. A hawkish stance matters relative to expectations and the other central bank's policy.
Illustrative example: both banks hold rates. One emphasizes persistent inflation, the other weakening employment. Their future paths diverge despite unchanged current rates.
Conclusion: which currency gained relative support and which upcoming report could change it.
03 / YIELD CURVEYields: identify the cause of the move
Bond prices and yields move in opposite directions. A yield increase alone does not explain why a currency should strengthen.
Open lesson
How to read it
- Compare 2Y, 5Y and 10Y. Shorter maturities are generally more sensitive to near-term policy, while longer maturities also reflect term premiums and debt supply.
- Compare the same maturities across two countries at the same observation time.
- Check the cause: policy, inflation, economic growth or risk. A risk-driven yield increase differs from an improvement in real yield.
Illustrative example: US 2Y rises while German 2Y barely changes after a US release. The differential has shifted in favour of USD. Check whether it persists against subsequent data and EURUSD's reaction.
Conclusion: what changed in relative financial conditions, not simply that yields rose.
04 / POSITIONINGCOT: who already holds the position
COT shows participant categories' positions on the reporting date. It helps assess how crowded an idea is and how positions changed over the week.
Open lesson
How to read it
- Start with the dates. The Friday release normally reflects Tuesday's positions.
- Compare Long, Short and Net within the same participant category and contract.
- Consider several weeks of context. A large Net Long can persist. By itself, it does not mean price is about to reverse.
Illustrative example: Net Long rises for several weeks, but fresh positive news no longer lifts price. This calls for checking whether the previous idea has lost traction, not automatically selling.
Conclusion: how crowded the idea already is and whether participants' conviction is increasing.
05 / TRADING CONDITIONSLiquidity, range and quality of movement
Market depth, execution cost and the size of a move are different characteristics. Consider them together when selecting a pair.
Open lesson
How to read it
- Assess execution using spreads, commissions and slippage under comparable trading conditions.
- Compare ranges and price retracements during the same hours, not one pair's Asian session with another's US session.
- Add the calendar. A major release or Bank Holiday can change the observed regime.
Illustrative example: one pair covered a wide range but repeatedly returned to its starting point. Another moved less but maintained direction. The first was more active, while the second better suited a directional idea within that observed window.
Conclusion: whether current conditions suit a directional idea or range trading.
06 / CONTEXT & DECISIONBuild a working macro scenario
A useful scenario connects a cause, confirmation and the next trigger for reassessment. It is shorter than a list of every known figure.
Open lesson
How to read it
- Cause: which release or statement changed expectations?
- Confirmation: do currencies, relative yields and related markets support the explanation?
- Next check: which event would strengthen or invalidate the conclusion? State the horizon separately: session, day or several weeks.
Illustrative example: inflation is more persistent than expected and relative short-term yields support USD. The next employment report will test whether the Fed can maintain tight policy. Weaker employment and a narrowing yield differential would require reassessing the explanation.
Conclusion: what supports the idea now and which new data would make it unreliable.
FURTHER READING
Explore further
A selection of external FXMacroData educational articles in English. Originals open in a new tab. Their historical examples are not current forecasts.
MDS lessons are educational explanations, not trade recommendations. All numerical examples above are illustrative.