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 financially sound “players” in the market.

All the forecasts get pooled together and averaged out.

These averages 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.

Types of Expectations

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 than 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.

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