Published On: Thu, Jan 19th, 2017

5 Events Leading to Potential Trading Opportunities in 2017

In 2016 the currency markets experienced a lot of volatility, as many different geo-political events had an impact on separate currency values. There was the shock Brexit vote in the UK, Donald Trump’s victory in the US Presidential election, a failed Italian referendum and many more factors that provided countless opportunities for forex traders to profit.

The fallout from many of these events is still ongoing, and 2017 looks set to be another year full of market turbulence. This is good and bad news for forex traders, as while it does present plenty of opportunities, there will also be a lot of heightened risk. Here are five big events set to happen this year which will provide potential forex trading opportunities.

1. US Dollar Rally

There will be plenty of uncertainty surrounding the US dollar and the country as a whole, when Donald Trump enters the White House. Already some of his comments have been blamed for the currency falling, most recently to two month lows against the Japanese yen, after he claimed the strength of the US dollar against China’s yuan was ‘killing us’. However, there were predictions before his election victory that the markets and currency would fall dramatically if that happened, but in the end it was nowhere near as severe as many assumed.

What is more likely for the US dollar in 2017 is that it will go on something of a bull run. After a number of years of Zero Interest Rate Policy (ZIRP), the increase in rates stopped for around 11 months until December 2016 when the Federal Reserve promised to increase interest rates by 25 basis points. Many experts are predicting a further three interest rate hikes throughout 2017, as long as the economy stays on track.

This should help continue solid inflation growth, which along with increasing interest rates will further strengthen the US dollar. Of course, there could be other factors such as Trump’s first 100 days in office and the political situation which have an effect, but for the most part investing in the US dollar in 2017 appears to be a good idea for many forex traders.

2. A Weakening Japanese Yen

The Japanese yen has always been a strong performing currency, often looked to as a safe option during times of high volatility in the forex markets. However, there are predictions that it could be one of the worst performing major currencies throughout 2017 for a number of reasons, and it has already started the year poorly. It may have gained against the US dollar in the run-up to Trump’s election, but in the two months since it has depreciated.

Japan’s economy is struggling to recover from deflation and stagnation and due to the rising global inflation it is likely to find it even harder, as greater yields will be available in other countries. The Bank of Japan is aiming to reach a 2% inflation level, yet given that inflation did not grow in 2016 and GDP remains just above 1%, there are worries that it will remain flat throughout 2017 as well.
The Bank of Japan wants to keep a lower yen though and instead see raised values in the Tokyo stock exchange, but it appears to have little control over this. Instead, the country will be relying a lot on the impact of Trump in stimulating inflation and not strengthening the USD/JPY pair.

3. Brexit

June’s EU membership referendum for the UK was one of the biggest political stories of 2016, with the decision to leave having a huge effect on many financial markets. The pound dropped to its lowest level in 30 years, the FTSE took a hit and many other currencies such as the US dollar strengthen in immediate reaction. Any forex traders who predicted such a result could have made some very big profits off the whole event.

However, since the Brexit decision was announced the pound has made something of a recovery, even if it may not yet be back to pre-Brexit levels. Plus, the effect of a weaker sterling has been beneficial in a few ways, with consumer price inflation increasing, manufacturing and export levels also on the rise.

It is expected that in March 2017 at the very latest Brexit will officially begin as Article 50 will be triggered. It should put an end to a lot of uncertainty surrounding Brexit and its impact on currency values, with the pound, euro, US dollar and others likely to experience price movements over this period, which all forex traders should prepare for.

4. Euro Troubles

Along with Brexit, the Eurozone is facing a lot of risks in 2017. It has weathered the storm of Greece, Ireland and Spain’s financial woes but with the possibility of the UK leaving the single market, the US dollar strengthening against the euro and further political situations unravelling, the currency is at risk.

France, German and The Netherlands all have presidential, parliamentary, regional and general elections this year, and they make up 56% of the eurozone’s economy combined. Then there’s also likely to be an Italian election for a new Prime Minister. Depending upon what happens, there could be big changes to the EU’s structure which would accordingly impact upon the euro.

For forex traders, it is worth monitoring the euro before each of these individual events, as well as the euro’s performance and outside influences.

5. Commodity Price Turbulence

Precious metals such as gold, silver and platinum have traditionally been safe haven investments during volatile times. Yet in 2016 they themselves were fairly volatile, with prices initially surging and gold volatility expected to continue into 2017.

This could impact upon currency trading as if precious metals continue to perform well it could see a dip for traditionally safe currencies such as the Swiss franc and Japanese yen. On the other hand, if precious metals remain volatile then those who would otherwise invest in gold at such times may look to currencies instead.

2017 is shaping up to be another exciting financial year across many fronts, with these five events and many more looking to create countless opportunities for forex traders to try and make their millions.

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About the Author

- Robert is a private trader with over 15 years experience trading the financial markets.