How Economic Reports Move Markets
Economic reports move markets because they instantly change expectations. Price doesn’t explode because of the number itself — it explodes because traders re-price risk in seconds. If you don’t understand how these reports hit liquidity and imbalance, you’re gambling every time news drops.
Why Markets React So Violently
Markets move on expectations, not facts. Before a report, liquidity providers tighten up, order books thin out, and sentiment becomes fragile. When the number hits, aggressive orders slam into weak liquidity and price jumps instantly.
This is the same mechanic behind volatility cycles — news is the catalyst that flips contraction into expansion.
The Reports That Matter Most
Not all reports hit the market the same way. These are the ones that regularly produce fast directional moves:
- Non-Farm Payrolls (NFP)
- CPI inflation data
- FOMC rate decisions
- GDP releases
- Initial jobless claims
- PMI readings
How Reports Create Imbalance
When news releases, one side gets caught off guard. Traders must re-price instantly, and that creates massive imbalance.
| Condition | Market Reaction |
|---|---|
| Expectations beaten | Aggressive buying spikes |
| Expectations missed | Aggressive selling hits fast |
| Mixed data | Whiplash volatility and false moves |
This ties directly into market imbalance — news simply accelerates that process.
What Happens to Liquidity Before the Release
Before major news, liquidity providers don’t want risk. They pull size off the book and widen spreads. When spreads widen, even small orders can move price far.
- book depth collapses
- spreads widen
- fake liquidity appears and disappears
- icebergs vanish
This is identical to what you saw in market depth behavior — news exaggerates every weakness in liquidity.
Why Beginners Get Destroyed During News
Beginners treat news like a trade signal. It’s not. News is a liquidity event. Without deep liquidity, stops slip, entries slip, and candles teleport instead of print.
- limit orders don’t fill
- market orders fill at terrible prices
- fake breakouts trigger stops
- reversals happen instantly
Bottom Line
Economic reports move markets because they force traders and liquidity providers to re-price risk instantly. If you understand liquidity, imbalance, and sentiment, you’ll stop treating news like a mystery and start treating it like controlled chaos.