The Forex is a global industry where various nation from the world participates in this transaction. When most of the focus is centered on the volatility and analyses of the trends, the disasters can also wreak havoc on the industry. Many people may not know the impact but when it comes to trading, a small event can affect the price movement. This article can be hard but try to read with attention. In this article, we will try to explain the aspects of disasters and how it affects the global currency, resulting in instability in the market. To keep the concept understandable, we will use examples and simple contexts where a novice person can also understand the ideas.
What are these disasters?
The first thing that we need to know is if the disasters are man-made or natural. The natural disasters like a tornado, tsunami and cyclones and the man-made events like war and political stabilities both have impacts on the price movement. Keep in mind everything comes down to money and when there are events like these, the market gets unstable. Before this starts to go over the head, these simple examples will help to decipher the concepts of trading and disasters. Always remember, every global action whether it’s natural or man-made, is going to have some sort of impact on the global economy.
When phenomena strike, it destroys the economy
When there is a tornado, infrastructures get destroyed. Depending on the level of strength and stability, outside assistance can be needed to stabilize the economy. To protect and develop the country, all savings are spent on the development and it adversely impacts the trends. There is no history where disasters brought a positive result. The dollar is the most traded and most popular currency not because of its acceptance, but because of the economy of the country. The US can cope with any phenomena easily and strongly than the other worlds and it is why the price is relatively stable. It also explains why all the major pairs in Forex have dollars. The major pairs are generally affected less by events and show stable volatility. If the economy is not strong, the price of the currency will come down and it will affect the price movement.
Man-made phenomena like wars and its impact on Forex
In the event of war, the value of the money decreases. The government spends more money on building the economy and it is supported by cheap capitals. The interest of these funding have lower interest rate and it further decreases the value of a currency. Many people may not agree with this idea as war can also help boost finance as happened in the US. The US started to focus on manufactured-based economic that helps to overcome the great depression. However, war does not help in the development and do not increase the value of the currency. A developed country’s finance is expected to have less volatility for the economic conditions.
In summary, what we have learned is the disasters affect the prices. The direction cannot be predicted but it is not positive. To avoid losses, it is advised not to invest in time like that as there are uncertainties. In simple terms, the industry expects the country to have a stable economy to get a desired trend on the price movement. As you develop experience, you will know about the ideas but at this time, know disaster is not expected in the Forex market.