Forex Trading: From Politics, Earthquake, to War

Forex Trading: From Politics, Earthquake, to War

The forex market is the most active and the largest financial market in the world. Naturally, considering that all economic activities always involve money, especially export and import activities that inevitably have to involve foreign exchange. Daily cash turnover reaches USD 4 trillion; created fluctuations are not infrequent in a wide price range.This is one of the more popular causes of forex trading. Forex brokers have sprung up everywhere, including in Indonesia.

The forex market in the world is always related to each other, because the money circulation happens globally. That is why important events around the world can quickly affect the exchange rates of certain currencies. Because one currency is also linked to another currency in a currency pair , indirectly the strengthening or weakening of the currency also affects other currencies.

Quite a lot of questions through webinars or live chat about what can affect the ups and downs of prices. This actually has entered the realm of fundamental analysis. Well, this time we will discuss in general what events can affect prices.

Economic indicators / data

Economic data released by certain agencies that provide information on the growth of a country’s economic sector such as inflation rates, interest rates by the central bank employment and unemployment rates, trade balance, housing, retail sales, business sentiment and so on.

In addition, it is also necessary to pay attention to comments or official statements relating to policies or economic prospects of relevant officials such as finance ministers or economic ministers, as well as central bank officials.

Political

Elections can also have a significant impact on the value of a country’s currency. Market participants usually see the results of the election as an entry point for the country’s economic policy makers. If the winner of the election is a stronghold that is considered “siding” with the progress of the economy, often the country’s currency will strengthen. The latest example might be the election in Britain a few days ago. The victory of the Conservative camp with a fairly good track record of economic policy was responded by the strengthening of the pound.

Often even the results of political surveys conducted have shaped market sentiment about the future economic outlook. Although it has not been proven by the results or the performance of a new government, often the results of the survey have been responded to.

This also includes – for example – if a strong candidate for a candidate for state leadership is believed to be able to produce positive policies for the economy.

We take cases from within the country. Maybe it’s still fresh in your memory about “Jokowi Effect” some time ago. Even though at that time it had not been proven, Jokowi had already become a figure that was quite favored, so that his candidacy alone had been able to influence the rupiah exchange rate and the JCI.

But subsequent political developments actually make wait and see marketers . The rupiah is still depressed, the JCI is fluctuating even though it is still in an uptrend since Jokowi took office as president. The political struggle that happened dampened market optimism. Even though they still believe in the proclaimed programs, there are concerns that the program will be blocked by the interests of several groups.

In essence, if the political situation is considered unfriendly for economic growth, then the market will also respond negatively.

Natural disasters

Extraordinary natural disasters can also have an impact. Earthquakes, floods, or storms can damage people’s lives in a country. Directly or indirectly, it can also affect currency exchange rates.

Infrastructure damage requires special attention because the availability of basic infrastructure is the backbone of the economy. If there is no adequate infrastructure available, the economic output of an area will certainly be disrupted or even paralyzed. Not to mention the costs to be repaired and revitalized; of course it must be taken from funds owned by the government which could be used for economic growth purposes.

The level of public spending can also be ascertained because they have to focus on post-disaster recovery efforts. If the government’s response is considered slow, the level of public trust – and investors – will also be reduced. Not to mention if it turns out that the country must import goods if it is unable to meet domestic needs due to infrastructure damage. At an extreme stage, this could result in an economic slowdown.

War

The impact of the war is also the same as natural disasters. Massive infrastructure damage occurred during the war. Costs incurred during the war are also very large, almost certainly will draw funds from other sectors; including economics.

Economic activity will be disrupted. More than that, the feeling of security that every investor wants is also certainly lost when a war occurs; minimal eroded. When investors feel insecure, they will leave it.

Even so, the occurrence of war can also be beneficial for certain sectors, such as industry. Examples are like what happened to the United States during World War II. The United States officially engaged in war after Japan attacked Pearl Harbor, a heartbreaking and embarrassing historical tragedy for the superpower.

The involvement of the United States in World War II made the industrial sector in the country rise from adversity due to the Great Recession (around the 1930s). The industrial sector is boosted to meet the logistics and armament needs of the army. But still the economic revival over the killing of tens of millions of lives is not a good choice. But that’s another topic.

The Bottom Line

Basically, important events in the world have an impact on market price movements, including forex . The essence of this paper is to show that the exchange rate of a country’s currency depends on the country’s economic growth; while economic conditions are influenced by the factors discussed above.

Regardless of your trading style, there is nothing wrong with having knowledge of the things described above. At least you can broaden your horizons about the factors that can influence people’s decisions in the world of forex trading.

author
Forex4Live.com is a forex trading system website that started to be published since 2011 and has been used by thousands of traders around the world. The system is very simple and accurate, priced at $ 167 for a lifetime membership with no monthly fees or hidden fees. Our team created this system by testing thousands of indicators then selecting 23 indicators and combining them into one great trading system.
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