How Political Conditions Affect the Forex Market?
The allies that a country can have can seriously affect how their currency is traded. When people have investments in a particular currency on the forex market, they may look to the allies of a country for other investments; allies are seen to be strong together, and can be seen as a good fit for those looking to dabble into other currencies.
The enemies that a country can have can also affect how the forex market deals with them. Countries that have powerful enemies may see their currency dip, as investors are not willing to take a risk on an unstable country that could be considered weak. Investors tend to look to the relationships between countries and currencies to try and play the forex market to get the best return on their investment. If a country has powerful enemies, they may not be seen as a safe investment
Politics and its impact on Forex market
There are various reasons for the move. The US Federal Reserve continues raising interest rates (and signaling more), making it less attractive to take risks abroad when returns can be higher in the US. Loans denominated in US Dollars are less attractive than they used to be. Fewer loans are taken while more are being paid back. Also, Trump’s new tariffs are also contributing to the outflows. While the most vocal disputes are with Canada, Mexico, the European Union, and China, other countries are affected as well. Smaller emerging markets are part of the global supply chain. If a Chinese company sources parts from Vietnam for its exports to the US, the Vietnamese factory suffers as well. Expectations for trade barriers already impact investment decisions well before they are impose