Politics and its effects on Forex
Of all the factors that play a part in forex, politics is a very influential factor that is often forgotten.
A countries political issues can lead to it's currency to go up or down, and traders often base their decision to trade in that currency on what is happening politically. Here are a number of examples that explain this a lot better.
If, for example, a particular government is quite unstable, that government could in fact change tomorrow without anyone knowing exactly why. They do know however, that as the government is so unstable a change could have adverse effects on economic growth. Using Zimbabwe as an example, they have a ten million dollar note, yet its value is almost nothing.
When a country has a new government that is well known for its fiscal responsibility, this would have a positive effect on the forex market. Forex traders would be more likely to believe that this currency would go up over time and the chances of any nasty currency issues would be low as the new government is far more fiscally responsible than the last.
Interestingly, when there are a lot of issues with the economy of the world, one of the currencies that is always snapped up is the Swiss Franc because it is known to be very safe.
As Switzerland is categorized as isolationist, their Swiss Franc is a good example of a safe currency. Currencies that traders call 'safe havens' are ones that might not have so much movement because they are very steady, however, they are safe to put your money into.
It is important to note these kinds of political situations as a trader. But there are more economic factors that play a role in how the Forex market behaves. - 23199
A countries political issues can lead to it's currency to go up or down, and traders often base their decision to trade in that currency on what is happening politically. Here are a number of examples that explain this a lot better.
If, for example, a particular government is quite unstable, that government could in fact change tomorrow without anyone knowing exactly why. They do know however, that as the government is so unstable a change could have adverse effects on economic growth. Using Zimbabwe as an example, they have a ten million dollar note, yet its value is almost nothing.
When a country has a new government that is well known for its fiscal responsibility, this would have a positive effect on the forex market. Forex traders would be more likely to believe that this currency would go up over time and the chances of any nasty currency issues would be low as the new government is far more fiscally responsible than the last.
Interestingly, when there are a lot of issues with the economy of the world, one of the currencies that is always snapped up is the Swiss Franc because it is known to be very safe.
As Switzerland is categorized as isolationist, their Swiss Franc is a good example of a safe currency. Currencies that traders call 'safe havens' are ones that might not have so much movement because they are very steady, however, they are safe to put your money into.
It is important to note these kinds of political situations as a trader. But there are more economic factors that play a role in how the Forex market behaves. - 23199
About the Author:
Stuart Baker has been online forex trading for a number of years and has used a number of different online trading robots. One such robot created for the current political times is The Forex Phantom. You can visit his blog here at The Forex Phantom Blog
posted by X - Men @ 5:30 AM
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