How the Olympics Affect the Economy and Your Forex Trading

The Olympic Games impact the economy as well as the reputation of the host country. If the perceived risk improves, online forex trading volatility goes down.

Online Forex Trading Takes Regional Investment Risk into Account

Online forex trading performs a reality check on all currencies. And risky economies tends to have more volatile currencies. The Olympics help the host country by stimulating the domestic economy in the medium term. But more significantly by improving the image of the country in the long term. Hosting successful Olympics proves that the country in question is safe to visit, safe from terrorists attacks, crime etc. And this improves popularity among tourists who want to visit the country later. As far as investors are concerned, they also see stability and safety as a huge advantage and they may consider investing in that country. The fact is that market risk, as perceived by the financial markets in terms of volatility, goes down. And as a result the currency of the host country is expected to become less volatile in the future. And this will be evident in online forex trading. Forex brokers take volatility into account as all markets become more volatile as risk increases. When risk goes down, volatility goes down, and in the case of variable spread forex brokers, spreads become smaller too.

Online Forex Trading Benefits from Successful Olympics

Online forex trading benefits from successful Olympics, as well as every forex trader. Not that volatility is bad, volatility is good in most cases. But currencies that lack reputation and are seen as unstable and perhaps as too risky, do need to have their reputation improved. Excessive volatility is not good because a market that is too volatile can do all kinds of crazy things, out of the blue. More importantly it tends not to respect support and resistance levels. So moderate volatility is better for everyone who wants to trade forex, the market is risky enough even at moderate volatility. And volatility will never ever go below a certain level, because the market naturally requires it. So all that we can do to reduce excessive volatility will make the financial markets function better. Just like the advent of derivatives in the 70s made commodity markets better. And the good effects are still with us today.

Long Term Economic Benefits

It is difficult to assess the long term economic and social benefits that the Olympics bring to the host country. But first and foremost it is the ultimate proof that the country in question becomes safe to visit. And while tourism is not the main foreign exchange earner in most countries, it is a significant one. Then it’s about the real estate market, which also gets a seal of approval on safety. Nobody ever wants to buy a house in a country that has no police and professional security forces. So the real estate market does benefit in the long term. These are long term effects, but still matter to the medium term oriented forex trader.