How is Forex Expected to Impact the International Economy?

Forex trading platforms have taken the world by storm and have streamlined the trading of international currencies. 

However, given that travelling is currently off the cards we could see a slump in Forex for leisure. What else is Forex used for and how will it impact the international economy?  

What is Forex? 

Forex, also known as FX, is the foreign exchange market – a global marketplace for trading national currencies. The trading of the currencies against one another is one of the largest liquid asset markets in the world due to the global scale of it.  

What Could Affect Forex?  

Unfortunately, the trading of foreign currencies will fluctuate depending on several different factors. This means that if you have invested in Forex then the value of your money might drop significantly or rise exponentially all of which can be tracked. Most of the time it’s unpredictable however and can happen very quickly. Here are a few factors that could affect forex and its impact on the international economy.

1. Global Events & Natural Disasters 

In the event of a natural disaster, the currency value in that area may drop as less people will be inclined to travel there. The rates of tourism will also cease due to shops and other buildings, areas, and excursions having to close whilst they heal and repair that part of the world. 

Global events such as a pandemic or crisis in one area of the world will also cause a decline in tourism, either due to the restrictions on travelling – like the ones we are currently faced with – or due to people being worried about travel. 

2. Political News & Updates 

If there is sudden political uproar in a country, this can also affect the trade rate of forex. People may be trying to flee their country and will be trying to trade in their national currency for another, which will devalue the original currency if many people are doing the same.  

Travel will also become slower in these areas as people will be afraid of getting caught up in the political onslaught, or there might have even been new government legislations made about the rate of travel.  

3. Unemployment Rate Rising 

As more people have become unemployed due to the global pandemic, there is a decreased interest in travel. Simply because most just can’t afford it. Many people will be choosing to travel within their own country, thus reducing the need for foreign currency. Those that have bought travel money before the pandemic hit and are now selling it to help with their unemployment will also receive a devalued rate back as there will be many people trying to trade their currency at the same time.