Recent Events Set to Impact the Forex Market in 2021

2020 became one of the most volatile years for all markets. Now many market-moving events are already expected for 2021.

The Foreign Exchange or Forex Market is the largest and most active financial market in the world. Participants from all over the globe take part in trillions worth of foreign exchange transactions daily. It comes as no surprise then that due to the global and interconnectedness of the forex marketplace, events from all corners of the world can have immediate consequences on exchange rates and currency values.

Below are just some of the events that have transpired this year that are set to have consequences in 2021.

US Presidential Election

The severity of political events on global markets can range from subtle, to substantial to even catastrophic. Dubbed by political pundits as ‘the most important election of our time’, the 2020 US presidential election saw Joe Biden’s victory over current President Donald Trump. Both candidates differed greatly in their approaches to topics such as social welfare, homeland security, economic growth and the ongoing coronavirus pandemic. Thus, this ideological shift has the potential to evoke greater volatility in the country’s currency. Biden’s commitment toward ‘net-zero carbon emissions by 2050’, for example, will not only impact the US Fracking and Fossil Fuels industry but will most likely affect several markets. New environmental conscious reforms introduced by Biden will certainly for at least a short period of time reduce economic growth.

New COVID-19 Strain and Looming Brexit Deals in the UK

The British pound took a major hit on Monday as the U.K discovered a new 70% more infectious coronavirus strain, leading other nations to temporarily restrict travel to and from the U.K. This new strain poses a major risk for the fragile rebound of the European economy.  It also still remains to be seen whether vaccines will be effective against this new strain. Additionally, the uncertainty surrounding Brexit trade talks has caused currencies to fluctuate as Britain and the European Union remain in a deadlock, while the December 31st deadline looms. Despite the challenges the currency stands to face, analysts still remain bullish on the pound heading into 2021 as the widespread distribution of a vaccine and an agreement on a Brexit deal can lend their support to the GBP.

US Second Stimulus Package

U.S. Republicans and Democrats reached an agreement for the second-largest relief bill in American history at 900 billion, following the $2 trillion Cares Act that Congress approved in March. Eligible individuals stand to receive direct stimuli payments of $600, half the amount provided in the first stimulus round. Some families will also receive an additional $600 per child. Moreover, the Paycheck Protection Program will reopen, targeting some of the hardest-hit small businesses who can apply for a second loan.

A large majority of US leaders view the new bill as a vital step to a larger relief package in 2021, which may provide a third round of stimulus cheques among other provisions. Although the new stimulus package is set to provide real support for the economy, its announcement failed to serve as a major bullish catalyst for stocks. This could be due to the new coronavirus strain dominating headlines shifting traders’ attention. Thus, its positive impacts remain to be seen within the coming weeks.

The new year is anticipated to witness the distribution of a COVID-19 vaccine and Joe Biden’s new presidential administration with a split Congress, the ongoing effects of which are yet to be seen. With many analysts predicting more volatility in the months to come, traders must ensure they stay up to date with all current affairs as we continue to navigate the uncertain waters brought about by the ongoing pandemic.

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Disclaimer: The content of this article is sponsored and does not represent the opinions of Finance Magnates.

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