In the Foreign Exchange Market, optimism amongst the traders is high during the start of a new year. Some of the traders may have made losses in the previous year while others may have similarly experienced massive gains. All in all, these two groups share the same futuristic opinion that good things are definitely in store for them. Most retail traders had an enthralling year in 2016, finishing it with solid performances in the market. The astonishing results of the U.S Presidential election, where Donald J. Trump (a right-wing Republican), and the Brexit Referendum (which saw the United Kingdom vote to leave the European Union) were among the highlights of the year. These global events had a profound effect on the volatility that was experienced in market and is expected to reverberate in 2017.
The rise of new economic and political risks is very likely to increase the volatility of the market a notch-higher this year. Events that took place in 2016 have in a way made it easier for Forex brokers and traders alike to anticipate the state of the market in 2017, thus making it easier for them to prepare adequately. Forex traders in particular have an opportunity to implement efficient risk management strategies coupled with the best technology for trade execution. The lessons learnt last year will be used to prepare for what lies ahead. The following are reasons why 2017 may the best year for individuals to trade Forex.
The Donald J.Trump Presidency
It is common knowledge that the new president of the United States of America subscribes to a very extreme brand of nationalism which he claims will ‘Make America Great Again’. His stance in trade and foreign affairs is likely to rattle some feathers internationally and has already caused anxiety among many. During election night, volatility in the Foreign Exchange Market was at an all time high. Brokers noted that the GBP/USD pair rose initially, fell again and rose to new heights. Most traders expect to benefit from this volatility in 2017. President Trump has also promised to undo regulations (like the Dodd-Frank Wall Street Reform and Consumer Protection Act of July 2010), implemented in the Financial Market after the recession experienced during the Obama era. Loose regulations ease limits on leverage, allowing brokerage firms with lower capital to get started in the Foreign Exchange Market.
Elections In Europe
Right-wing nationalists have been on a steady rise in Europe .Countries such as France, Italy, Germany and the Netherlands have all seen the rise of an anti-establishment majority which could easily vote in a political candidate who shares their extreme measures and ideology. The disillusionment felt by these nationalist stems from rising inequality, weak economic growth, low wages and the influx of immigrants fleeing war in the either the Middle East or Northern Africa. Elections in these countries are slated to take place in 2017 with many analysts predicting that the populist anti-establishment parties may easily come to the helm of power. The result of this would be fluctuations of currencies and increased volatility that traders can use to their advantage when making speculations that will determine their trading decisions.
The Brexit Referendum of 2016
The Brexit portmanteau represents the United Kingdom’s soon-to-be withdrawal from the European Union. On 23rd June 2016, after a non-binding referendum, 51.9% of people in the United Kingdom unexpectedly voted in favor of leaving the European Union, causing widespread chaos in the Financial Markets. This exit process is expected to take a couple of years with the first step being the UK government bringing into play Article 50 of the Treaty on European Union, which is simply the prescribed route for withdrawal. After 24th June, the British pound plummeted to an all time low since 1985 with its Financial Times Stock Exchange (FTSE) index 100 falling by 8%. It is however important to note that no one can conclusively claim that this will always be the trend as the market has been experiencing extreme volatility. The agreement between the two parties (the United Kingdom and the European Union) will determine whether Forex brokerage firms will remain in the United Kingdom or set up shop elsewhere. Traders should thus keep tabs on this development as the risk of volatility may also benefit them with more gains during trades.
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