Uncertainty Unsettles Currency Market

If you want to make money in foreign exchange trading you look for volatility. That fact should make trading profitable now as uncertainty unsettles the currency market. Forbes discusses the major uncertainties affecting the U.S. dollar, the pound sterling and the Euro.

Growing economic uncertainty has been the key theme in currency markets this year. The International Monetary Fund (IMF) warned at the start of the year of the mounting risk of derailment in global growth. Economies like those of the U.S., U.K. and Eurozone are facing significant changes and challenges, which have ongoing impact on their currencies. Significant events that could precipitate this uncertainty include the following:

The major uncertainties cited are the U.S. election, the evolving Brexit saga and the continuing Eurozone debt crisis with Greece still a thorn in the side of the body of the EU.

The Falling Pound

NASDAQ asks if the British pound break of 1.30 indicates a new decline.

The British pound has remained under selling pressure following Friday’s slide after an early Monday bounce failed to follow through.

Our GBPUSD tracking poll continues to show a bias to the downside with 58% of respondents seeing it ending the year below 1.30.

The Brits voted to leave the EU and the new British government promises to follow through. The problem is that the Brits don’t want to give up the benefits of EU membership and want to pick and choose what they keep and what they give away. The EU is telling them that they cannot eat their cake and have it too. The pound is likely to keep falling in fits and starts as this story plays out and uncertainty unsettles the currency market.

The EU and the Never Ending Greek Debt Crisis

The Greek debt crisis is off the front pages of the international news but continues none the less. Deutsche Welle reports on bankruptcies as the Greek debt crisis rumbles on.

Thousands of jobs in agricultural wholesale are under threat after the country’s biggest supermarket chain Marinopoulos went bankrupt. It’s the latest indication that sweeping austerity has achieved just little in the debt-laden country.

The USA responded to the 2008 financial crisis by expanding credit while the EU demanded austerity of its members. The USA did better and the EU is still struggling. Greece is a financial basket case but still in the EU and still using the Euro. A big part of the uncertainty that unsettles the currency market is the status of debt plagued EU members.

U.S. Elections Uncertainty

USA Today reports that the US presidential campaign has tightened up to within the margin of error of the polls. With 50 days left before the election a lot could change and that uncertainty unsettles the currency market.

“There’s a sense that everything that happens has more weight than it probably should,” says Katie Packer, deputy campaign manager for Mitt Romney’s presidential bid, recalling the final weeks of the 2012 campaign. “You’re trying to focus on everything, and it’s hard to distinguish the things that really deserve your full attention.”

In the final stretch four years ago, she says Romney’s team didn’t initially realize just how much the candidate’s comment in a debate- that he had gathered “binders full of women” to consider for jobs when he was Massachusetts governor – was going to resonate. And not in a good way.

The USA is the world’s biggest economy and the US dollar is the world’s dominant currency. The uncertainty that unsettles the currency market is strongly driven by the big question mark hanging over the US presidency.