The forex market is known to be one of the largest and most liquid in the world, with an unfathomable amount of trades being made on a daily basis. It is also known to be very sensitive to economic and political events, which often impact currency values and influence investor behaviour. The world has seen its fair share of political and economic turbulence in recent months, and many currency airings have seen a good amount of volatility as a result. Here are some of the events from around the globe which are impacting the forex market, or will do so in the near future. US Sanctions One of the most significant developments in recent months has been the deterioration of relations between the US and Iran and Russia. With both latter countries supporting the Syrian government, and the US strongly opposing it, there are now serious divides between the countries involved. If the US imposes further sanctions on Russian companies (oil, aluminium), it could well have a significant impact on the rouble, which was recently down 0.36% against the dollar. The same goes for the Iranian rial as well as Iranian stocks and shares, so it looks as though traders investing in these currencies may well find they are highly volatile. ECB Meeting The European Central Bank’s decisions often hold major sway over the value of the euro, especially in the short to medium term, and so any meeting of the ECB is usually monitored by forex traders around the world. The ECB met again recently, and announced that it would stay true to its promise of maintaining economic stimulus measures past September, should it be necessary. This news could well help boost the value of the euro, at least in the short term, but many may want to wait for further policy developments before they invest. Brexit Although the GBP/EUR pairing has calmed down since the Brexit vote in 2016, which saw the pound crash 7% against the euro in less than 24 hours, many of the effects of Brexit are yet to come. The UK doesn’t leave the EU until March 2019, and volatility between the pound and the euro is likely to continue to build as this date moves ever closer. Many have predicted that the UK economy will be worse off after its exit from the EU, especially if it does not manage to set up an effective trade deal with European counterparts. This could well damage investor confidence in the pound, although currently the currency is holding fairly steady. Strong Dollar Whilst the dollar has had ups and downs throughout Donald Trump’s presidency, it is fair to say that it is performing very strongly as of late. US treasury yields have been continually rising as a result of the US economy strengthening, which has caused a surge in confidence in the US currency. The trade standoff between the US and China has also showed signs of coming to a halt, which has also helped boost investor confidence. For many forex trades, it is not a case of whether to invest in the dollar, but what their forex contract size should be (at least for those trading CFDs). If the dollar continues to strengthen, then other currencies may well be sold off until the dollar weakens. The forex market is clearly facing a tumultuous yet exciting time, with volatility in many currency pairings around the world. As such, it will be interesting to see how this influences investor behaviour in the coming months, especially is resolutions are not found for major events which are currently impacting global markets (US sanctions in particular). Forex traders would do well to keep a close eye on currencies like the dollar, euro and pound, and take advantage of the any fluctuations in currency values.
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