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Kathleen Brooks on Forex: A simple approach to trading foreign exchange using fundamental and technical analysis by Kathleen Brooks

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Political risks

Politicians control the economy and their policies can change the future growth trajectory of an economy. Political risk that fundamental forex traders need to be aware of comes in a few forms:

  1. Changing of governments.
  2. When policies change that could affect economic growth.
  3. When unexpected circumstances arise that the market had not anticipated.

The key thing to remember with political risk is that traders like certainty – they like to know who is in charge of an economy and that they will take the right decisions to boost economic growth. Thus:

  • A low level of political risk tends to be currency positive
  • A high level of political risk tends to be currency negative

Greece is a good example of political risk and ...

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