Every political decision, every smart or not so smart move a company makes, every event happening on the other side of the planet can be crucial for the currency, commodity, stock, or crypto market, so you have to follow closely the intense dynamics in the biggest and most influential companies and countries all around the globe.
For instance, if there is a higher unemployment rate in the United States, this could be a sign that the dollar will go down compared to other major currencies.
Big natural disasters could also lead to dramatic changes in the stock market, but as you have seen in the example above, it doesn’t necessarily mean that all the markets will go down. In online trading, you have to be prepared to take advantage either way.
Basically, you have all the information firing towards you from news, TV, and social media. You just have to learn how to filter and potentially benefit from it.
The global financial markets are interconnected and are influenced by financial and macroeconomic statistics. So, the Forex market also does not make an exception. Major financial news, fundamental statistical reports, and important geopolitical events affect currency rates — the basic instruments of the foreign exchange market. But nothing compares to seeing the actual effects of the news on the Forex market. Let’s take a closer look at some examples, shall we?
How do Monetary Actions affect Forex?
The decisions big central banks make in terms of monetary policy have an impact on the currency pairs immediately. Depending on how the interest rate is changed (too fast or too slow), or if there is an unexpected comment made about future interest rate changes, the currency pairs drift up or down drastically.
How do Macroeconomic Releases affect Forex?
This is another crucial kind of Forex news with an important and sudden impact on the currency rates. Probably the most important report to watch out for is the US quarterly GDP data releases. If the released information regarding the quarterly change is very different from the expected value or the previous quarter figures, then the currency market immediately reacts accordingly.
Another crucial aspect affecting the Forex markets are the geopolitical events. We will focus on them more thoroughly in the lesson dedicated to politics later on, so stay tuned.
How did the Covid-19 Pandemic Influence the Markets?
Last but not least, we should analyze how global cataclysm affects the markets. Needless to say, we are all familiar with this type of situation since 2020 was subjected entirely to the Covid-19 outbreak, which caused a pandemic all over the world, affecting people’s lives, jobs, and of course, the global economy as a whole.
Initial Losses Across the Board
At the early stages of the pandemic, the most noticeable effect on the stock market was an initial slump. NASDAQ-100 fell 7.4% between January 23 and March 6. Another 12.4% fall followed over the next two weeks. The S&P 500 reacted in a similar way, drifting down with 10.6% between late January and March and 14.9% at the beginning of March.
As the social distancing measures slowly took place all across the world, people started losing their jobs and spending less, impacting literally every sector. The early coronavirus crash was historical, even though many stocks have recovered since then.
Tech Stocks Thrived Hitting Record-Highs
There was, however, a huge exception to the stock market’s early decline involving the technological sector. Tech stocks skyrocketed as companies adopted work-from-home models. A famous example we cannot ignore is the videoconferencing service Zoom, which went up nearly 500% since the beginning of 2020. Online retail giants like Amazon and its competitor Alibaba also did extremely well due to the higher demand for online sales.
Commodities Became More Volatile
Of course, not all the sectors had the same luck as the Tech field. Throughout the pandemic, commodities had a rough turbulent period, but despite recent losses, some of them managed to recover as well, for instance, the precious metals. On the other hand, agricultural commodities had made some recent gains but still cannot recover from the initial shock.
Take a Look on the Bright Side
Volatility, however, could also be your friend in terms of online trading, where you could potentially profit even if the price of a certain stock, commodity, index, etc. goes down.
As you can see, the impact current events have on the market is very powerful, so it is important to monitor all the related news and make informed trading decisions.