The effects of Politics on Forex
When you think of forex and its contributing factors, one that is often forgotten but plays a very large roll, is Politics.
There are endless political issues that can cause a currency to go up or to go down, traders take note of this as it affects their intentions to dabble in a particular currency. Here are some examples to better explain this.
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.
If a new government that is known to be more economically responsible, then this would have a good effect on the Forex market. This means that traders believe that when they invest in this particular currency, it has a good chance of going up over time as there won't be any tragic currency issues because the economy has responsible people at the wheel.
Interestingly enough, when there are a lot of problems going on in the economic world, one of the currencies that are always gobbled up is the Swiss Franc because it is known to be very safe.
These currencies that people call 'safe havens' are ones that might not have as much movement because they're so steady, but they're safe to put money into. They won't collapse the next day. The Swiss Franc is especially an example of this because Switzerland is an isolationist.
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. - 23167
There are endless political issues that can cause a currency to go up or to go down, traders take note of this as it affects their intentions to dabble in a particular currency. Here are some examples to better explain this.
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.
If a new government that is known to be more economically responsible, then this would have a good effect on the Forex market. This means that traders believe that when they invest in this particular currency, it has a good chance of going up over time as there won't be any tragic currency issues because the economy has responsible people at the wheel.
Interestingly enough, when there are a lot of problems going on in the economic world, one of the currencies that are always gobbled up is the Swiss Franc because it is known to be very safe.
These currencies that people call 'safe havens' are ones that might not have as much movement because they're so steady, but they're safe to put money into. They won't collapse the next day. The Swiss Franc is especially an example of this because Switzerland is an isolationist.
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. - 23167
About the Author:
Stuart Baker has been online forex trading for a number of years and has used a number of different expert advisors. One such robot which has been designed with the current economic environment in mind is The Forex Phantom. You can visit his blog here at The Forex Phantom Blog
posted by X - Men @ 2:58 AM
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