     |
Geo Politics - More Price DriversThis week we are going to see how geo politics affect the value of a currency. Hate Reading Financial Pages?If you would rather visit your dentist than read the financial pages of the paper, then Forex trading may be for you. It is the only market which can be effectively traded using political news and economic releases.Currencies are political as well as economic assets and because of this, they are very responsive to any political disturbance. Currencies Represent Countries Rather Than CompaniesYou need to understand that investor's behavior with respect to any geopolitical unrest is that speculators run first and ask questions later. Whenever investors fear any threat to their capital, they will quickly retreat to the sidelines until they are certain that the political risk is gone.Politics Almost Always Trumps EconomicsThe history of Forex has many examples of political trades.One such example is the Canadian dollar. In 2005 the Canadian economy was showing its best performance in 30 years. Massive rises in the price of crude oil had produced a significant inflow of cash. However, the Liberal leadership was facing a non-confidence vote in parliament, which kept the dollar weak. Once the vote was held and the Liberals survived the motion, the dollar surged more than 200 points in one week as the market once again focused on the strong underlying economic fundamentals. Next week we'll explore another major currency price driver. Wishing you trading success,
|
