Forex, or the foreign exchange market, in constantly changing by the second. Global currencies are typically weighted against each other, which means if one moves then a plethora of others are affected as well. This means that when big political events occur, especially regarding a nation’s economy, the forex market goes into flux. This year, two major political events have shaped the forex market and will continue to do so until something is written in stone. Those two events are the United States tax plan and Great Britain’s Brexit decision. As Donald Trump and Theresa May continue to do their best to finalize something, other parties continue to stand in the way of progression. Here is how a final decision might affect forex markets.
U.S. Tax Plan
The plan was originally supposed to be passed prior to Christmas, but it continues to be held up in Congress. Trump’s tax plan looks promising for forex markets, but it remains to be seen when it will be passed into law. The delay has affect the U.S. dollar poorly over the last few months, so the American currency is desperate for a decision. Disappointing reports from October did not improve in November, which has forex traders worried about the future.
The Euro and pound have struggled pretty badly since the entire Brexit situation came about. Obviously, no decision has been made yet, which does not bode well for Europe’s two main currencies. It seems that almost everyone has lost their confidence in Britain’s Prime Minister, Theresa May, as she continues to drag this process out after months and months of discussions. Unlike the U.S. tax plan, where a passing vote will automatically help the dollar, the decision could go either way, which will directly impact these currencies. It could be positive, or it could be negative, so forex traders are stuck just waiting until something is passed. Who knows how long that will be.