Why do we care if the country that issued the currency has an over-involved government that likes to intervene in the Forex market? We care because knowing just how active a government is in the markets will dictate how we approach trading a currency.
Some governments intervene in the markets every single day because they are actively trying to maintain a peg between their currency and another currency or basket of currencies (as the Chinese government does with the U.S. dollar, the euro, and a few others). Some governments never intervene in the markets, believing that markets should move where they are going to move and that it would be too expensive to try to intervene anyway.
In most cases, however, you can find moments when a government has stepped in and intervened in the market, but the incidents are few and far between. For example, the United States has intervened in the markets, but the last time was on November 8, 2000 – I guest.
What Economic Announcements Are Important to You?
Why do we care which economic announcements are important to a country’s economy? We care because if we know which economic announcements are most important, we can watch and be prepared for those announcements when they come up on the economic calendar. The release of most economic announcements is scheduled months and months ahead of time, so the actual release should never be a surprise for a currency trader.
For example, knowing that the U.S. dollar tends to have a strong reaction to the monthly unemployment and non-farm payroll numbers should put you on high alert whenever we approach the first Friday of the month (the date when this announcement is typically released).
Are You a Safe-Haven Currency?
Why do we care whether a country’s currency is a safe-haven currency? We care because knowing whether a currency is a safe-haven currency will influence how we will approach trading that currency during times of economic crisis. For instance, knowing that the Swiss franc (CHF) is viewed as a safe-haven currency would lead us to believe that the Swiss franc is going to gain value as investor fear increases. On the other hand, knowing that the New Zealand dollar (NZD) is definitely not considered to be a safe-haven currency would tell us that the New Zealand dollar should he losing value as investor fear increases.
