Forex and World Events

Forex trading is a most lucrative investment in the global money market today but it is also one of the most erratic. Why is it quite unpredictable?

Forex trading leans on a lot of global factors. For one thing, some billions of forex traders and investors all over the world exert a lot of pressures on markets. Add to that various world and local political issues and events that can send stock markets skyrocketing or plummeting at a moment's notice. Forex is easily tickled to excitement by currencies devaluing because of this, or foreign selling or exaggerated forex speculating. But more than these, forex trading is also rocked perilously by global natural cataclysmic events.

On world political issues, a dragging war with Iraq, for instance, which continues for years, is a source of widespread and pervading negative speculations, not only on the Iraqi market, but also on other markets allied with Iraq's foe. Middle East countries share a camaraderie that is as good as a major oil cartel. A war against one often drags other allies in, though surreptitiously. The result often is an oil price hike. More money is spent for buying it and that may register a certain weakness on many already weak currencies. When currencies weaken, foreign selling comes in.

On natural catastrophes, a major earthquake, like that which struck Peru recently, obviously redounds to forex trading serious down trends and other low forex index readings. In fact, any significant global event can somehow reverberate and trickle down to a forex trading debacle---war, earthquake, tsunami, climate change, an infection or virus breakout, bird flu and other animal disease, radiation contamination, nuclear threat, and others. Money markets are rocked by these and speculators are likely to have their says on them and send markets going berserk.

Particularly, banks are affected by any drastic global calamity. They may either close or continue to open if they choose to brave the floods of widespread big withdrawals. With such banking activity, currencies are likely to plunge and lose out in global forex trading. A currency is as strong only as its gold (and dollar) reserves. When such necessary backing on a currency weakens or is withdrawn, holders of that currency in a forex market loses confidence and either sells down low or abandons the market altogether.

Forex trading and world events are closely linked; the latter affects the former in more ways than one. Scrupulous forex trading is keeping a serious eye on world events.