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The World Events that Affected the Value of the Currencies in the Last Decade

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The World Events that Affected the Value of the Currencies in the Last Decade

The impact of global events is probably best felt when economies either improve or decline. The values of currencies always change in response to global economic, health, and political events, and those changes are important factors in forex trading. Since the establishment of the modern forex market, traders have often kept a close watch on news events both on the global and local scenes. As a forex trader, you must understand the global events that affect foreign exchange. Here are the top events in the last decade.

The Triple Disaster in Japan(2011)

In 2011, Japan suffered three major disasters. An earthquake triggered a tsunami, damaging the country’s largest nuclear plant. On March 11, 2011, a 9.0 magnitude earthquake hit japan, triggering a huge tsunami that killed thousands and destroyed properties worth over $200 billion. The tsunami also destroyed the nuclear plant, causing a fire that lasted for days and radioactive leaks. Japan gradually recovered from the events now called the ‘triple disaster,’ but along with many other countries, Japan was forced to reassess its nuclear policies.

The Exit of Britain from the EU (Brexit, 2016 – 2020)

The UK, considered one of the world’s economic powers, was formerly part of the European Union (EU). The EU is an economic alliance made up of 27 countries within the continent of Europe. The EU has a history of economic, political, and military cooperation within and with non-EU countries. The UK was one of the strongest members of the EU. That’s why the exit of Britain impacted the value of certain currencies in the global forex market. Britain’s exit (shortened to Brexit) from the EU was not sudden, but it had a global impact nonetheless.

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In 2017, most of the UK voted to leave the EU, and the government decided to implement the voting result. The UK completely exited the EU on January 31, 2020. What followed next was not as bad as experts predicted, but the value of the British Pounds (GBP) fluctuated against other major currencies such as the Dollar, Euro, and Japanese Yen. However, economic growth slowed by significant margins in 202 Q1, reaching a 17-year low. But, despite the pandemic and its effects, the UK economy began a slow but steady recovery, even performing well despite the lockdown.

The Coronavirus Pandemic and Resultant Lockdown (2020)

In November 2019, whispers emerged of a new health situation with the potential to become a global challenge. No major news station reported it, and all was relatively fine. However, the next few months would prove otherwise. The first COVID-19 case was reported on December 31, and WHO declared a global pandemic in January. Governments reacted by declaring curfews, lockdowns, and other tough social measures recommended by WHO to help slow down the pandemic. People started panic-buying essentials in readiness for life behind closed doors, resulting in price hikes. The financial market, too, took a hit. First, stock owners were faced with an option to sell dwindling stocks and hop onto a stock with better potential due to the lockdown. Many stock owners responded by selling stocks to save their money.

Soon, many countries recorded a failing economic situation due to low economic activities and increasing demands for energy, food, and basic amenities. Governments responded by creating economic stimulus packages to help citizens afford basic amenities and stimulate the economy. It wasn’t long before smaller economies took a hit, and many countries entered recession as the values of their currencies dived. The global economy is still recovering from the impact of the pandemic.

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The Rise of Cryptocurrencies (2013)

Cryptocurrencies are virtual digital assets based on cryptography and blockchain technologies. The history of cryptocurrencies dates back to the 90s when a famous cryptography expert talked about creating virtual assets. Two decades later, in 2009, Satoshi Nakamoto launched Bitcoin, the world’s first cryptocurrency. But cryptocurrencies did not gain prominence until 2013 when developers started rolling out new cryptocurrencies.

By 2017, the cryptocurrency launched as a financial market and, in just a decade, has grown into a trillion-dollar market. Cryptocurrencies have a market relationship with fiat currencies for two reasons; they are measured against fiat, and traders can exchange, sell, or buy them for fiat. The rise of cryptocurrencies brought a new option for traders who were only involved in the stock and forex markets. As crypto investments grew and stablecoins (cryptocurrencies pegged to fiats such as the Dollar and Euro) launched, the USD gained strength as it became the popular fiat currency in the crypto space.

China Emerges The Largest Economy (2015)

In 2015, China gained the top position as the world’s largest economy based on purchasing power parity (PPP) and its growing gross domestic product (GDP). China’s economic and political policies put the country in a strong position to edge the US from the top. China also holds the US debt (the second largest) and therefore has a strong pull in negotiating economic policies and trades. China’s emergence as the largest economy boosted the Chinese Yuan, making it stronger than it was. The Yuan is one of the most traded currencies in the global forex market.

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The 9/11 Terror Attacks (2001)

On September 11, 201, terrorists attacked the US, killing nearly 300 people and causing damages worth nearly $95 billion. The US stock market closed and reopened to new lows. The 9/11 attacks worsened the economic recession that started when the internet experienced a new investment phase. The attacks also prompted a war that would drag on for decades and cost trillions.

Housing Crises and Bailouts (2007 and 2008)

A housing crisis triggered by the effects of ‘mortgage-backed securities’ caused an economic crisis that increased interest rates. Increased mortgage premiums triggered low payment rates, which crashed the mortgage-backed securities. The economy hit in 2007, and in 2008, Lehman Brothers and the American International Group went bankrupt. The former invested heavily in mortgage-backed securities while the latter provided insurance to investors. The situation triggered government bailouts worth nearly $1 trillion.

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