“The political decision of a country plays an important role in determining what happens to its currency”
Forex Trading is fast becoming one of the largest sources of income to online users- no matter their location. However, many always complain of loss, due to their inexperience and their inability to predict the Forex market. This prediction cannot be very accurate; but understanding the various events that directly affects the Forex market plays a major role in avoiding loss.
In Forex trading, geopolitical and macroeconomic events are considered as the two most powerful forces affecting market movement.
The political events in a country have a great effect on the economic outlook for that country and, consequently, the perceived value of its currency. Elections and crisis in a country are considered some of the biggest political events that affect the economy of a country directly. This happens because, exchange rates often favours parties who have a strong financial policy as well as governments who show willingness for economic growth.
A good example is the Brexit. The aftermath of the Brexit had a major impact on the British pound (GBP) when the UK voted to leave the EU. Sterling reached a record low, something that was last witnessed in 1985 after the vote because, the economic prospect of the UK, suddenly became gloomy and uncertain. A similar thing happened in the US, when US President, Donald Trump emerged as the winner of the US election.
Another example is the aftermath of the US invasion of Iraq in 2003. From the onset, many thought that the United States would have controlling interest in Iraqi’s wealth (oil!). Because of this, the dollar rose dramatically. It perceived that the war would end quickly and the US would gain all that wealth. However, the US Dollar levelled up again when it became clear that this was not going to be the case.