Taking the Political Temperature
Forex Trading markets are keenly affected by political changes and shifts in power around the globe. But how exactly do shifts in geo politics influence international currency markets? How do traders become sensitive to changes in leadership and alliances worldwide? Let’s learn from recent world events and how they have affected forex trading.
Current markets are influenced by:
- Suspicion – Russian officials are accusing the US of faking a Syrian chemical attack in order to justify a recent US bombing of Syria in order to oust the Assad regime
- A war of words – words can certainly harm the markets as a war of rhetoric is fired between North Korea and the United States. Trump warns of repercussions if North Korea goes ahead with missile testing in order to celebrate the 105th anniversary of Korea’s supreme leader Kim Jong-un’s late father’s birthday.
- Vulnerable nations – Should war break out between the US and North Korea, Japan would be vulnerable as a close neighbour.
- Production drops – Japanese industrial production is down to 2.0% from 3.2%. US retail sales fell 0.2% in March after a 0.3% drop in February
- Check on the dollar – The dollarhas weakened 0.5% versus the peso, 0.4% against the yen, 0.2% relative to the Swiss franc, Australian dollar, and sterling and 0.1% vis-a-vis the yuan, euro, kiwi, and loonie.
- Note how gold is doing – Gold closed 0.8% higher yesterday which leaned in to the risk aversive mood of traders.
Supersitition and important dates – Some traders are just plain superstitious, or people are busy doing tehir taxes. Check annual world events to know the rhythms that may be influencing trade. In the States, April 15 is the due date for U.S. individual income taxes to be filed so often a time when people are distracted or simply not in a perfect mood to make risky trades. Luck also may have something to do with it, some traders are skeptical around certain dates – the Titanic sank on April 15 and Abraham Lincoln was shot on the night of Good Friday on April 14, 1865.
Many factors influence trades on any given day. Learn how to take the temperature of international geo politics and learn how to predict when the markets will amp up to feverish pace and when they will cool down to a more sluggish pace.