Many traders believe that news is always priced in, assuming that by the time an announcement is made, the market has already fully adjusted for it. While markets are forward-looking and often anticipate events, this belief is not always accurate. In reality, how much news is priced in depends on how expected the event is, the level of surprise in the data, and current market positioning. Surprises, shifts in sentiment, and the interpretation of news often cause major price movements even when traders thought everything was already factored in.

The belief that news is always priced in ignores how dynamic, emotional, and complex real-world markets are.

Why Traders Think News Is Fully Priced In

Several factors contribute to this assumption:

• Efficient market theory: Academic models suggest that all known information is immediately reflected in prices.
• Pre-announcement positioning: Markets often move ahead of scheduled releases, creating the illusion that reactions are already complete.
• Experience with minor news: For small, expected releases, markets often react very little, reinforcing the belief.
• Analyst consensus: Widespread expectations around data can make traders assume the result will match forecasts precisely.

However, reality often proves far messier, especially around high-impact news events.

When News Is Truly Priced In

There are cases where markets have already adjusted for news:

• Highly expected results: When economic data or central bank actions align closely with widespread forecasts, reactions are usually muted.
• Heavily telegraphed central bank moves: If a central bank signals a policy shift clearly and repeatedly, markets often adjust ahead of the decision.
• Repetitive information: News that merely confirms what traders already believe often results in little or no movement.

In these cases, price action before the event often “uses up” the energy the news would have generated.

When News Is Not Priced In

However, there are many situations where news causes significant reactions because it was not fully priced in:

• Unexpected results: Data that significantly beats or misses expectations (such as surprise inflation spikes) triggers major moves.
• Shift in tone or forward guidance: Even if a central bank meeting matches forecasts, the tone of future policy discussions can spark massive market reactions.
• Emotional overreactions: Markets sometimes exaggerate responses to news due to positioning imbalances, herd behaviour, or panic.
• Low liquidity periods: In thinner markets, even moderately surprising news can cause disproportionate price spikes.

Thus, believing that news is always priced in can leave traders dangerously unprepared.

How to Handle News and Pricing Expectations

Successful traders manage news events with realism and flexibility:

• Watch expectations carefully: Knowing not just the forecast, but also how stretched market positioning is, gives deeper insight.
• Focus on surprise elements: Markets react most violently to unexpected shifts, not to confirmation of forecasts.
• Observe initial reactions: The first few minutes after news can reveal whether the market sees the news as meaningful or already digested.
• Stay flexible: Prepare for different scenarios instead of assuming a muted or explosive reaction.

Analysing both sentiment and data is crucial for trading around news successfully.

Examples of News Not Being Fully Priced In

• US CPI surprise (2022): Unexpectedly high inflation readings triggered huge USD rallies and sharp equity sell-offs.
• Bank of England rate hikes: Markets expected small hikes, but hawkish forward guidance caused the British pound to surge beyond forecasts.
• Swiss National Bank shock (2015): Complete abandonment of the EUR/CHF peg blindsided traders, showing that not all policy shifts are telegraphed.

Each case proves that even in modern, information-rich markets, surprises happen — and they move prices dramatically.

Conclusion

It is completely false to believe that news is always priced in. While markets anticipate and discount known information to some degree, surprises, emotional reactions, and shifts in tone often create major new price movements. Smart traders prepare for a range of outcomes, respect the power of unexpected news, and adapt their strategies accordingly to thrive in dynamic environments.

To learn how to master trading during news events and navigate both expected and unexpected market moves, enrol in our expertly crafted Trading Courses today.