Currency markets are changing amid global inflation, the Ukraine-Russia war, ongoing supply chain problems, and the lagging effects of COVID business shutdowns. How can traders leverage the sometimes-rapid movement in values of international currencies? Luckily, individuals can utilize a vast range of tools offered by the top FX brokers. The European war that has raged since early February sent shock waves through several economies and markets. Likewise, recent rate hikes by the US, in an attempt to dampen raging inflation, have propped the dollar up and sent several major currencies downward.
In any normal year, it might only take one of those events to wreak havoc with FX markets and international currency prices. But in 2022, there’s almost a perfect storm or coalition of events, including war, worldwide inflation, and a historically massive logistics snafu. How can traders take advantage of the upcoming price fluctuations? Knowledge is power, so it helps to review the most relevant points about the current state of the foreign exchange markets and what to watch for as the year unfolds.
Use a Regulated Broker
Reputable online brokers offer a number of tools that let account holders make the most of the inevitable price changes in store for the rest of the year. Opening a forex account at AvaTrade is a popular move for FX enthusiasts. Top brokers make a vast number of educational materials and training tutorials available. It’s imperative to check the credentials of any firm you choose to work with, as there are unlicensed offshore operations that advertise extensively on the internet. It only takes an hour or so to vet a prospective brokerage, so make sure to check on licenses, educational materials, trading platforms, fees, account minimums, etc.
Follow Ukraine War Developments
Ever since Russia’s invasion of Ukraine in February, world commodities and currency markets have been deeply affected. Not only are both nations large exporters of grain, but Russia sends natural gas and oil to dozens of national clients. As soon as the hostilities began, oil prices jumped significantly, and grain futures were soon hit the same way. What should traders watch for? The war is months old now, and there’s no peace treaty in sight, even though both sides have demonstrated a desire to sit down and negotiate a cease-fire. This is a situation where individuals who take part in forex should stay abreast of news because even a small rumor of an end to the fighting could be enough to move commodities futures and several currencies, notably the ruble.
Track US Fed Decisions
The Federal Reserve Bank has upped interest rates twice within a short time span and could do so at successive meetings. As long as it follows that path, it’s very likely that the dollar would continue to gain strength, the British pound could weaken further, and the EU’s euro might remain stagnant or weaken. If you trade FX, it’s essential to check in on Fed-related news headlines at least once per day. Unrelated to the Fed’s actions but an equally important factor in the world economy is the US political climate. Congressional elections are slated for November, and the sentiment right now is that there could very well be a change of power. For traders, a Republican victory in the House and the Senate, or both, could be hugely important because government spending would almost certainly decrease.
Study the Taiwan-China Situation
Communist China has been suggesting the liberation of democratic Taiwan for more than 70 years but has never had the military or political circumstances on its side. Now, with a weakened US, a war in Eastern Europe diverting international attention, and the burning desire to seize what they consider their own territory, 2022 could be the year it happens. If it does, the forex markets could see some of the largest value swings in history, particularly between China’s yuan and any currency paired with it.
Don’t Ignore Health News
Before COVID turned global commodities, equities, and futures markets upside down, FX enthusiasts didn’t pay much attention to health and medical headlines. Nowadays, it pays to keep an eye on reports about new viral strains, COVID mutations, other pandemics, and various contagious diseases of all kinds. Monkey-pox could lead to repercussions as grave as COVID, but the virus is still in its early stages. There’s no need to become a medical specialist in order to deal in foreign exchange, but following international science and health news is a must.
Monitor the Supply Chain Crisis
Nothing has affected the import-export sector in recent years more profoundly than the ongoing logistics backlog. There are multiple and complex reasons for the dilemma, but the most relevant for traders is to watch for a resolution. Currently, delivers of hundreds of raw materials are moving at a snail’s pace. The slowdown has caused severe shortages in many industries, particularly heavy construction. Watch for an eventual resolution and expect net-importer nations to benefit the most.