Exploring the Impact of Geopolitics in Currency Movements
Believe it or not, the politics has been quite often one of the significant drivers of currency movements. Battles and political negotiations between countries are major determinants to change in exchange rates. As global traders we would like to understand under what circumstances geopolitical risk can enter the forex market. In fact if there are some changes in political leadership or especially government policies then you will find a currency’s value changing a lot. For example, if a new leader took over a country and markets are asking themselves ‘What does this mean for the economy and for us politically?’ On the other hand, business friendly policies are promised by a government, there will be a strong national currency and policies promising instability or poor financial management can undermine a nation’s currency. Currency value is strongly linked to political stability because political stability is generally considered more predictable.
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In political world” should be “in the political world.” Also, “real time data” should be “real-time data. Traders can use these tools to know if elections, political unrest or significant policy change is likely to affect markets. With a political upheaval or change in government policies, once the news hits, currency can move fast, so being ready for that and proactive is very important.
One other important factor in the determination of currency movement is trade relation between countries. Issues such as tariffs, trade agreements and sanctions abound with geopolitical issues and can be very volatile causes. For example, if a country imposes some tariffs on imports coming in from another country then the other country’s currency can become weak because traders will be concerned about the economic effects. For instance, trade war or the breakdown of major important international treaties also lead to some uncertain situation and investors start shifting towards safer US dollar or Swiss franc.
One advantage in MetaTrader 5 for Mac is the ability to keep a track of these shifts in the market due to trade related news. Traders can set up custom alerts, follow economic calendars and track global trade to know exactly what’s happening at all the time and change their position accordingly. Traders should try to seize opportunities at the right time, and knowing how currency pairs react to such global trade events is important when currency values change along with the changes in geopolitics.
Conflict and security concerns can be heavy in affecting the forex markets as well. Often, times of a military action or tensions between a few nations or regions unstable, investors usually run for the safe haven currencies. In times of conflict, it’s normal for the currencies of poorly functioning economies to fall while the US dollar, the Japanese yen, and the Swiss franc are considered to be more stable currencies. This is the reaction due to traders looking to hedge their capital on safer assets.
It’s important to keep up to date with global events to help understand how geopolitical movements play a part in currency movements and how they might impact the markets. What MetaTrader 5 for Mac does is to allow traders to keep abreast of news, track the movements of currencies in real time, and come up with decisions based on these news and developments accordingly. With both fundamental and technical analysis integrated, traders will be able to bounce their strategy off political landscapes that change.
Knowing and understanding the geopolitical risks of the forex market can make or break your trading. Traders who know how to use the right tools, and who stay informed enough realize that market conditions are always changing can make smarter moves in the ever changing forex environment.
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