USD. The most popular and arguably the most important currency there is. And it has been like that for decades now. But in the last few years we have discovered that it is not all cut and dry for US dollar. We have seen a lot – ups and downs, traders abandoning it and traders coming back.
Although popularity of USD is not going to fade any time soon it is safe to say that its recent behavior has caused a lot of troubles. And all because of what? Volatility – our main enemy in the game.
So. What causes dollar’s volatility?
1. Its own status.
2. Changes in monetary policies.
3. Economic data
4. Non-economic data.
1. Its own status.
In the beginning of 20th century the history turned favorable to the dollar. And since 1914 dollar has been gaining strength and popularity so much that it has become a reserve currency for virtually all of the currencies in the world. And it is what has been causing volatility in the performance of the greenback.
You see, when the currency gets its powers from all over the world, the slightest troubles and shakes in any of the countries are causing turbulence in the performance of the greenback. A slight turbulence, but still. And it is all due to the fact that everything is connected and intertwined.
2. Changes in monetary policies.
Like all of the other currencies dollar turned out to be very sensitive to the monetary policies in the country. Any changes of the monetary policies are at once reflected in the performance of the currency. And we as traders feel that momentarily.
Even though we instantly feel changes in our trading, changes in monetary policies are also affecting long trading. Long-term prospects of trading and activity of traders with the currency depend on the soft and beneficial monetary policies. And if the government of the country-holder of the currency fails to give us that we are simply not going to stand for it which is usually reflected in the performance of the currency.
3. Economic data
‘GDP numbers, consumer confidence, construction spending, inflation figures, durable goods orders, industrial production, manufacturing data, payrolls, new home sales, retail sales, the trade balance and unemployment figures’ – according to the researchers all of these reports influence the performance of the greenback.
Around the time of their release volatility of the greenback tends to wake up and spoil trading around the world. And that is not according to the researches of Eurozone – those who can benefit from a weaker dollar. No. Those are the words of American experts themselves. And that’s saying something.
That is exactly why we at toolstrades pay so much attention to various reports that can cause volatility in the performance of different currencies.
4. Non-economic data.
As we have already said, events all around the world can influence the performance of the greenback. And that goes not only for the economic data. That can also be said about all of the other events. Political and social shifts, new agreements and alliances – everything. Dollar rate against the basket of six major currencies depends on all of these.
Important corporate news and events around the globe can also affect the performance of the greenback, so do not exclude these from your research when you are trying to figure out what performance of the greenback is going to look like.
Of course there are many more factors that can affect the performance of the greenback. Prices for oil and commodities, political climate inside the US, American relationship with all of the other countries, behavior and statements of US President – all of these take part in the performance of the greenback. And we are to look out for all of them.
Difficult? Yes. But not impossible. And very, VERY necessary.
