Politics Contributes To Currency Value

Most people investing in the Forex Market are interested in how the individual economies are going for each country, but there is another factor that they take strongly into account: politics. The political environment can change the Forex Analysis of a country sometimes more than the economic status of the country. Knowing the political situation of the countries whose currency you are considering investing into is important. It can sometimes be even more important than your Forex signals or any information received from your Forex Trade Copier program.



Elections



In the United States, the currency changes every four years when we have a presidential election. While the United States has relatively seamless changes in power, there is a certain amount of instability while this change occurs, and the market gets nervous.



Political Scandals



In 2006, Japan’s economy was doing very well, and most people were expecting the Yen to increase in value. The problem started when the Governor of the Central Bank figured in a financial scandal. While he was not directly involved in the scandal itself, he was tarnished by it politically. As the political pressure on him grew, many thought he would resign, and the value of the yen decreased in spite of the booming economy in Japan at that time. When the market saw that the governor was going to retain his power, it stabilized, and only then did the value of the Yen increase.



Major Political Events



Just like the stock market, the Forex Market loves stability. When the government of Egypt was being overthrown, the Egyptian Pound began to drastically decrease. The value of their currency was falling so badly, that there was talk of the IMF propping it up. When something as volatile as a government overthrow occurs, it is to be expected that the currency of that country will drop significantly. The faith investors have in that currency falls because there is no way to know what will happen to the country until a new government is established, and the world can get a look at how it will handle the country’s finances.



When investing in Forex, ask your Forex EA to help you get the political information for the countries your are interested in. Forex brokers and EA’s are constantly watching the political landscape around the world, so you should as well. While it won’t guarantee you positive results, it will help increase your chances.