I've been seeing lots of people complaining about the lack of market reaction to economic data. This is something I've been warning about every day since April 2.

Here's the thing about economic data. The data is by definition backward looking but the market is a forward looking machine. To trade economic data successfully, one has to consider three things: the underlying expectations, the context and whether the data changes future expectations.

All the data we are getting now is old news because most of it doesn't reflect the hit from tariffs yet. Moreover, once we start to get weaker data (if we even get it at all), the conditions might have already changed by then.

Say for example, we get more positive developments on trade negotiations front. The markets will front run (and they are already doing it) the end of the trade wars and the following improvement in growth and sentiment.

By the time the data will start to show weakness, the market might already be looking to future strength and therefore fade all the negative data in expectations of better data in the future.

So, everything revolves around tariffs now, that's the only thing you should focus on.

All the best traders in the world will tell you this: never focus on the present because it's already in the price. Focus on the next 6-12 months because that's where the market will head to.

I wrote a longer article on this topic here.

Source: Forex Live