Economic Data’s Impact: Trading Volume Surges on Key Releases
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Economic data releases, particularly those concerning labor and retail sales, trigger significant surges in trading volumes, especially in interest rate futures and options. Surprises in these key indicators can dramatically alter market activity within minutes of their release, according to recent analysis of trading patterns from 2021-2025.
Key Economic Indicators and Trading Volume
Following the 8:30 a.m. ET release, surprises in labor, inflation, and retail sales data consistently demonstrate statistically significant impacts on trading volumes within the first one, five, and ten minutes. This significance is persistent using a P-value threshold of 0.05 (5%).
Did You Know? The initial jobless claims report,released weekly,provides an early snapshot of the labor market’s health,influencing investor sentiment and trading strategies.
The One-Minute Impact
The one-minute results are particularly striking. On days with no economic data releases or when data aligns with consensus, approximately 20,663 interest rate futures contracts are traded in the first minute after the report (8:30:00 – 8:30:59). A one standard deviation surprise in nonfarm payrolls (NFP) can lead to an additional 174,173 futures contracts traded during that minute, totaling about 194,836 contracts.
Related labor market data, such as the unemployment rate and average hourly earnings, also strongly influence interest rate volumes, as do initial jobless claims. A one standard deviation miss from consensus in these areas can result in an additional 80,000 to 145,000 futures contracts traded in the first minute. The impact on options volumes during this period is typically smaller.
Retail Sales Influence
Retail sales have emerged as the second most influential data point after employment numbers. A one standard deviation surprise versus forecasts on retail sales typically produces an additional 80,000 contracts of futures volume in the minute after release.
Inflation Data Reactions
Despite the post-pandemic surge in inflation, market reactions to surprises in CPI, core CPI, and PPI, while still statistically significant, tend to be more muted. These surprises add only 20,000 to 30,000 contracts to the futures trading volume within a minute of their release.The immediate impact on options volumes is often mixed and negligible.
Trading Volume Over Time
Within five and ten minutes of the data releases, increases in trading volumes tend to produce results of similar statistical significance, with the amount of additional trading volume increasing over time. In the ten minutes between 8:30:00 and 8:39:59 ET, approximately 167,000 interest rate futures and 25,000 options contracts are typically traded. On days with data surprises, these numbers can be significantly higher.
In the ten minutes following a one standard deviation surprise in employment-related data, there are typically 316,000 to 730,000 more futures contracts traded and 30,000 to 65,000 additional options contracts traded. surprises in retail sales remain the second largest volume driver.
Pro Tip: Monitoring economic calendars and understanding consensus forecasts can help traders anticipate market reactions and adjust their strategies accordingly.
By contrast, within ten minutes of the release, a one-standard deviation surprise in inflation statistics such as CPI, core CPI, PPI, and core PCE tends to produce milder responses, with 60,000 to 120,000 more contracts traded beyond the usual. for interest rate options,the excess volumes stemming from a one standard deviation surprise range from 2,500 for PPI to 14,000 for core CPI.
FOMC Announcements
Recognizing that FOMC policy announcements can significantly influence trading activity, a dummy variable is included to account for these days. Interest rate options daily trading volume is, on average, 1,747,832 contracts higher on FOMC announcement days compared to non-FOMC days.
Z-Scores and Data Analysis
Z-scores are calculated using a three-year rolling standard deviation to normalize the magnitude of surprise relative to historical volatility. Such as, to calculate the z-score for the january 2021 data releases, the standard deviation from January 2018 to December 2021 is used. This rolling standard deviation reflects how the market’s reaction to surprises evolved over time,ensuring that future data is not used to make inferences about past data.
Dummy variables are used to account for the differences in trading volumes that structurally occur on different days of the week, using Monday as the baseline. Similarly, a dummy variable is included for FOMC announcement days, with the coefficient representing the difference in average trading volume on FOMC days compared to non-FOMC days.
Trading Volume on Mondays
Mondays are,on average,the lowest volume days with about 286,000 to 921,000 fewer futures trades and 360,000 to 606,000 fewer options trades than the other days of the week.Wednesdays are typically the busiest day of the week in terms of volumes for both futures and options.
Why 2021-2025?
Since 2021, financial markets have experienced significant uncertainty about future interest rates, mostly because inflation rose sharply after the pandemic. Core PCE, the Fed’s preferred inflation measure, exceeded the 2% target, hitting 3.1% in May 2021 and peaked at 5.3% in March 2022. Core PCE was 2.9% in January 2025.
| Economic indicator | Futures Volume Impact (1-Minute) | Options volume Impact (1-Minute) |
|---|---|---|
| Nonfarm Payrolls (NFP) | +174,173 contracts | smaller Impact |
| Retail Sales | +80,000 contracts | Smaller Impact |
| CPI, Core CPI, PPI | +20,000 to +30,000 contracts | Mixed and Negligible |
How do you think algorithmic trading impacts the market’s reaction to economic data releases? What strategies do you use to navigate market volatility following these announcements?
Evergreen Insights
Understanding the impact of economic data on trading volumes is crucial for investors and traders. Economic indicators provide insights into the health of the economy, influencing market sentiment and investment decisions. The labor market, in particular, is closely watched, as employment figures can signal potential shifts in monetary policy.
Historically, surprises in economic data have led to increased market volatility and trading activity. The magnitude of the impact depends on the indicator’s importance and the degree to which the actual data deviates from market expectations.
FAQ
What is a standard deviation?
A standard deviation is a measure of the amount of variation or dispersion of a set of values. A low standard deviation indicates that the values tend to be close to the mean (average) of the set, while a high standard deviation indicates that the values are spread out over a wider range.
What are interest rate futures?
Interest rate futures are financial contracts obligating the buyer to receive or the seller to deliver the underlying asset at a predetermined future date and price. These contracts are used to hedge against or speculate on changes in interest rates.
what are interest rate options?
Interest rate options are contracts that give the buyer the right, but not the obligation, to buy or sell an interest rate instrument at a specified price on or before a specified date.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Trading in financial markets involves risk, and you should consult with a qualified financial advisor before making any investment decisions.
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