It’s fair to say that there’s an element of Groundhog Day when reviewing the year that has just passed right now.
Once again, 2021 has been a bit of a let-down in many ways – not least for forex traders hoping for economic recovery in the wake of the pandemic.
Of course, volatility in foreign currencies can create opportunities for those who enjoy wild price swings, and using software like the Tickmill trading platform has created opportunities for those with a keen eye for a changing landscape.
It would be great to know what to expect in 2022, but at the moment, making any predictions about the world’s economic and political environment is fraught with risk.
Nevertheless, here’s just a few of the factors that will have an impact on forex trading in the coming year.
There are so many unknowns created by the pandemic that making accurate predictions about the state of the global economy in 2022 is nigh impossible.
The emergence of the Omicron variant, and potentially others, next year will naturally create further spirals in the recovery from COVID-19. Nobody really knows what’s around the corner…and uncertainty creates both possibilities and risk for forex traders.
Another factor to consider is that some countries will recover more quickly than others. It’s worth keeping an eye on stats ranging from the number of daily cases in a nation to their vaccination rollout, as these offer an insight into the speed and efficacy with which a country might recover.
As forex traders will know already, the major currency pairs are all pegged to USD.
So, it’s all eyes on America, not least of all on their recovery from the pandemic – the nation has a mind-bogglingly high death rate for such a wealthy country – but also on their political situation.
The presidential mid-terms are due in November 2022, and it will be a real eye-opener to see who is elected to Congress and state-level and local offices.
The polls suggest that support for the Democrats is waning, and with rumours circulating that Donald Trump could run for the Republican candidacy in 2024, the political landscape in America could be set for a monumental shake-up once again.
Relations between some of the planet’s mega powers, notably the USA and China, appear to be worsening.
They have already implemented trade bans and vetoes upon each other, and the concern is that other countries will pick their sides and align themselves with the two battling countries.
There will be an impact upon international trade and the supply chain, and that, in turn, will affect the minor and macro-economic climate – a state that forex traders must be aware of.
As inflation continues to spiral, so too does the cost of living for consumers – that will have an impact upon the success of businesses as well.
Clearly, the economy of individual countries will be hampered by rising inflation – if it continues unchecked, at least. Once again, that will have an impact on forex trading, with some currencies being more appealing than others.
Inflation in the US and UK, for example, has recently reached decade-longhighs, and yet there are nations in the Middle East and Europe that are experiencing inflation levels close to zero – they are, perhaps, more appealing to investors and traders.
As we know, there are plenty of countries out there that rely heavily on tourism for their economy-boosting revenue.
As the pandemic continues to play out, international travel restrictions could once again wreak havoc on the ability those nations have to make money.
It’s the economies that are powered by production and exporting that are likely to thrive if2022 is damaged by the pandemic once more, and those that rely on tourism could once again flounder – useful insight for forex traders.
Finance and banking
There’s no getting around it – cryptocurrencies are, for better or worse, shaking up the state of finance and banking.
As more and more people invest in Bitcoin and similar coins, the mainstream rollout of crypto will growcloser and closer – especially as governments and banking powers seem so reluctant to regulate this fast-going sector.
If the average Joe and Jane turns to decentralised finance, it will clearly have a knock-on effect to traditional forms of banking – that too will have economic repercussions. How can banks set interest rates and control inflation if they don’t know the financial position of their populace?
For forex traders, the growing crypto movement is a risk to traditional currency investments.