It is safe to say that 2017 has been (thus far) a noticeably volatile year in the world of forex trading, as the first six months of the year were very unpredictable. As summer continues to heat up, the level of unpredictability has shown no signs of settling down and the usually quiet summer trading has not materialized. After the UK election result delivered economic tremors throughout Europe, and as Donald Trump’s presidency continued to be mired in controversy, July 2017 showed all the signs of a yet another hard month. That isn’t all; issues regarding sanctions on Qatar in the Middle East and ongoing issues related to cryptocurrency made this month a rocky road to navigate for forex traders.
II. What Has Been Happening in the Market?
You may have noticed a prominent keyword within the above paragraph: “volatility”. Some experts predicted that the GBP would actually show a quieter month, as it had already faced such uncertainty during election season. However, it seems that another unexpected blow was lurking in the form of diminishing inflation. On July 18th, the GBP dropped down 0.3% against the USD at 1.3023 and became 1.1% weaker versus the EUR at 1.1251. This drop could have been much sharper had the USD not been battling against its own issues.
Speaking of the USD, it suffered a series of knocks during July, which culminated in the dollar index reaching a ten-month low. This news was piggybacked from another failed Trump initiative, as his healthcare bill failed yet again to gain traction, with the forex market reflecting a real lack of faith in his economic leadership. The only saving grace was the ability of the USD to rebound slightly as July drew to a conclusion. After rising 0.7% on July 25th, it held steady as the Fed policy statement was expected to maintain interest rates at their current level.
Considering the strong performers during July, the EUR is likely to gain the most plaudits. As Germany’s business climate – which is noted for its prominence – continues to outperform expectations, it has been reflected in the EUR price. Data shows that upon publication of the related report, the EUR/USD rose by 0.14%, rising to approximately 1.17. On top of that, the EUR/YEN broke above 130.00, with the EUR/USD seeing a 0.16% increase to 0.8945.
III. Major Economic News/Announcements
Tying into events in the market, it is well worth reiterating some of the major economic news or announcements that occurred during July. For the most part, the fallout from the UK general election dominated the headlines, which - as no doubt you have read – had a detrimental impact on the pound. Throwing a spanner into Brexit negotiations, and proving to be a real political faux pas on the part of Theresa May, the election aftershocks (especially through ongoing Conservative Party unrest) could impact the performance of the GBP for some time.
From the sagging pound to the weighed-down dollar, Donald Trump’s presidency has so far proven to be questionable at best. Making matters worse was the recent Senate Judiciary Committee testimony of James Comey, which addressed Trump’s links to Russia, related interference in the 2016 election, and the President’s competency and honesty. The USD has had to stand up under political controversy before; with Trump at the helm, it will likely have to do so again.
Qatar has been under the microscope for its supposed links to terrorist activity during the month of July, something that has been praised by Trump. Sanctions have been imposed on the Middle Eastern nation; Saudi Arabia, the United Arab Emirates, Bahrain, and Egypt cut both transport and diplomatic links with Qatar. With these sanctions set to continue, this period of uncertainty could extend into 2018. This could have a damping effect on not only Qatar, but also the nations with which it has heavy investment ties, such as the UK.
IV. Currencies to watch
When compared to the frailties of the USD, the EUR is showing some signs of momentum. For that reason, and the fact that the eurozone leads in both growth and political stability as the summer rolls on, it’s fair to say that the EUR/USD will be a pair to watch, with many giving it a bullish outlook. Another pair to watch – largely as the USD continues to struggle – is the AUD/USD. On Australian shores, employment levels continue to stand up to estimates, in contrast to the mixed numbers emerging for the U.S. For that reason, the AUD/USD could be worthy of a bullish outlook in the coming weeks.
If you’ve been keeping up with headlines during July, you’ve likely discovered that political turmoil still firmly grips the forex market, especially in the case of the USD and GBP. However, a key takeaway is that even in times of turmoil, opportunities for profit still present themselves for those who want to capitalise on the deficiencies of some of the world’s most actively traded currencies.
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