The largest and most liquid financial market in the world, the Forex market, is driven by major global events. There is a huge impact on Forex trading when there are enormous employment shifts or political events that affect the economy.
The latest political change that may greatly affect Forex, particularly in Europe, is the exit of the United Kingdom from the European Union, or BREXIT. The impending United States Presidential Elections may also affect the Forex market, with candidates having varying opinions on foreign exchange policies.
Since we are still waiting for the final terms and agreements of BREXIT and the US will have their elections at the last quarter of the year, it is safe to say that the Forex landscape is fraught with uncertainty. Most financial experts cannot give concrete trends, unlike in years past. However, experienced Forex traders at XTrade Europe assure us that amidst the long phase of uncertainty and all the economic implications that go along with it, the market has stabilized quickly after the upheaval.
Traders are still advised to proceed with caution, but at least the Forex market appeared to bounce back quite nicely. In the next part of the article, we will discuss specific currencies and how they are affected by these global changes.
Global Currency Updates from XTrade Europe
- The Sterling Pound – The currency that is most affected by BREXIT is of course, the pound. After the decision, the pound has steadily fallen by a big percentage, in 31 years. If Britain does not give assurances and a concrete economic plan amidst its exit from the European Union, it will continue to fall against the US dollar. However, many Forex experts, including the ones from XTrade Europe are still optimistic that the weakness that we are seeing in the pound will only last for one quarter, and once political stability has been re-established, it will gain momentum.
- The US Dollar – The US Dollar is currently going strong, and is considered a safe haven after the upheavals in Europe and the lack of firepower in Asian markets. However, all that might change with the coming presidential elections. It all depends on what party will win. The monetary policy of the Republican Party is usually centered on tightening of interest rates, protecting the dollar, and national debt reduction. It is mainly centered on tightening of the budget. On the opposite side of the pole, the Democratic Party’s policy is support on public sector projects, investments, and increased spending.
- The Euro - According to XTrade Europe, the Euro should worry traders more than the Sterling Pound. When the United Kingdom begins its talks on how to gracefully exit the European Union, we should turn our eyes on the rest of Europe that still use the Euro as currency. There are also major political events happening in less economically stable countries of Europe, such as Spain’s electoral situation and Italy’s constitutional reform referendum.