2016 was a turbulent year for the markets, the economy and as a result both big and small time traders. Anyone trading from large companies to individuals who use platforms like CMC markets was likely to be affected by the news of Brexit and the many other events in 2016 which made the markets volatile and the economy unstable. The Forex market took this the hardest, and uncertainty about the strength of the pound made it difficult for Forex traders to make the decision as to whether stick with their investments or cash out. Now that the initial trepidation has died down and the market (for now) has somewhat stabilised, what can Forex traders expect for 2017?
Strength of the dollar
It’s hardly a secret that among the public Donald Trump may not be the most popular President that the U.S has voted into power, with thanks to his controversial campaign. However, the one thing that he has stood by is his desire to get the American economy back on track. Although we’ve seen many great political leaders, none have actually managed to ensure a good run of economic stability.
First and foremost Donald Trump is a businessman, and it will be interesting to see if he leans on his experience during his presidency, particularly in relation the to economy.
Some of his idea’s on socioeconomics may sound far fetched, and probably won’t be as easy to implement as he suggests they will be, but when it comes to executing deals he does have the experience behind him – whether the people agree with his business tactics (and ethics) or not. If nothing else he certainly is confident in his abilities and it will be interesting to see if behind his confidence is the ability and strategy to turn things around for the better economically. Therefore, It is entirely conceivable the dollar could rise under Trump.
Below you can see monthly chart of EUR/USD. This pair is right at 1.05 support. If this pair will go down, the next stop might be at 1.0000:
However – the Sterling still looks to be suppressed by Brexit
2017 will be the year of the triggering of article 50, which could have huge economic implications. Not only will this mean that the wheels for Brexit are to be put in motion, but the Prime Minister will be pressured into revealing more details on how the deal is going to work out, something that until now she has kept us relatively in the dark about.
Towards the end of last year the Prime Minister was being urged to – and flatly refused – to share the details of the deal she was set to strike with the EU member states regarding how we’re going to trade going forward.
Although people may assume that the UK will still be able to trade with benefits, this is not necessarily going to be the case, and as a result could have a direct effect on the Forex market. Uncertainty surrounding the UK’s terms when making their exit from the EU is likely to continue to give the Sterling a bashing for the most of 2017, with the currency fluctuating in a similar way to the last six months of 2016.
Below monthly chart of GBP/USD. Support did not hold and it is possible that price will go lower:
China marks the New Year with extra requirements
Due to how much their social culture has changed since the days of Mao it could be easy to forget that China are still in fact a communist country. While this is not always evident socially, the New Year and 2017 has marked a change in the economics of forex trading for China.
To stop money being moved out of their own market China is set to impose far more restriction on changing the Yuan to other currencies, something that respected broker CMC Markets raised concern about this last November.
Last year the Yuan suffered from its steepest annual slump in quite some years, and so it’s unsurprising that the government and central bank are trying to keep the currency in house. China already imposes annual limits on currency conversion, which reset at the beginning of each year.
This year, however, they are set to impose many more regulations for customers converting Yuan into other currencies, such as customers converting must now give far more detailed accounts of the planned use of their funds, and that anyone converting Yuan to other currencies must specify that this isn’t going to be used to purchase overseas property, securities or insurance. Anyone breaching these rules will be put on a regulators list and denied the opportunity to convert funds for a certain amount of years.
As we’ve looked at in detail, 2017 is set to hold a lot of uncertainty for the foreign exchange market, and as a result is an unsettling time for Forex traders. Only time will tell what will come of the dollar, gbp and the yuan, and in deed what political or social events to happen in the coming year that might sway the market.