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Trump’s Return: What Forex Traders Need to Know About the New Administration

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Read Time: 6 minutes


Donald Trump’s return to Office as the 47th President of the United States marks a significant political and economic shift, creating both opportunities and challenges in the forex market. 


Trumps second-term agenda, marked by aggressive trade policies, tax reforms, and deregulation, has the potential to impact global markets in complex ways, especially the foreign exchange market. Fear not; there will be plenty of opportunities to accompany any disruptions that the Trump Administration will bring.

One of Trump’s most critical economic agenda’s is his renewed focus on tariffs. As during his first term, Trump has emphasised targeting China, with plans to raise tariffs on Chinese imports by 10–15%, ultimately increasing tensions between the two nations.



Why does this matter?


China’s economy has direct and indirect influences on markets, primarily through global trade. In 2024, China's foreign trade reached new heights, with total goods imports and exports amounting to 43.85 trillion yuan (approximately USD $6.1 trillion), marking a 5% increase from the previous year. Exports grew by 7.1% to 25.45 trillion yuan, while imports saw a 2.3% rise to 18.39 trillion yuan.

The trade surplus expanded significantly, reaching a record $992 billion, driven by a surge in exports, particularly to the U.S. So, you can imagine how Trump’s focus on tariffs could affect this.

Other proposals include broad tariff hikes, with some extreme scenarios suggesting across-the-board levies of up to 10% or a staggering 60% on Chinese goods. Such moves, while aimed at protecting American industries, carry substantial implications for global trade flows – which will of course affect currency rates.

The U.S. dollar, often a safe-haven currency as we know it, has provided an impressive bull-run recently;

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Figure 1-DXY (US Dollar Index) Daily Chart



There are essentially two scenarios:

  1. A weaker USD

    In his first term as US President, Trump openly said the dollar (USD) was too high. And now, in his second term, he’s singing the same tune. This could provide some fantastic opportunities for us forex traders – especially when currencies such as the AUD and NZD are severely undervalued.

  2. Continued dollar strength

    We could see further strength if global investors react to heightened uncertainty and anticipated inflationary pressures.

Overall, it’s likely that continued tariff increases will disrupt supply chains and weigh on U.S. economic growth, potentially weakening the dollar in the long term.

In addition to trade, Trump’s fiscal policies have the potential to impact currency prices. The extension of the 2017 tax cuts, along with potential new tax breaks, is expected to stimulate economic growth in the short term but could also widen fiscal deficits, already exceeding 7.5% of GDP. Higher government borrowing to finance these deficits may push up U.S. Treasury yields, attracting foreign capital and boosting the dollar. Yet, sustained fiscal imbalances could lead to long-term concerns over debt sustainability, ultimately eroding confidence in the greenback.

The Trump Administration’s approach to deregulation is yet another factor likely to influence forex prices. Trump’s plan to roll back Biden-era regulations across sectors such as energy, finance, and manufacturing aims to reduce costs for businesses and encourage investment. This deregulation, in addition to tax cuts, could lift business confidence and support equity markets, creating a risk-on environment. In such scenarios, higher-yielding currencies such as our Australian dollar and the Canadian dollar could potentially benefit from improved sentiment and rising commodity prices.


How to Trade Trump 2.0


Monetary and Fiscal Policy Signals


So far, Trump has been on a war path signing off executive orders and pushing to make change. Given that currency markets are influenced by macroeconomic and geopolitical events, it’s imperative to keep an eye on the headlines for potential shifts in monetary and fiscal policies. In doing this, we can stay one step ahead.


Look for Hedging Opportunities


Trump’s presidency previously brought unexpected shifts in international relations, creating geopolitical uncertainty that could impact the forex market; during such times, safe-haven currencies such as the CHF or JPY are typically reliable options. Additionally, if Trump reinstates policies that favour U.S. energy independence, oil-exporting nations such as Canada (CAD) or Russia (RUB) may see increased currency volatility tied to changes in commodity markets.


Be Prepared and Adapt


Trump’s criticism of the Federal Reserve for maintaining high interest rates during his first term suggests potential attempts to influence monetary policy, making the Fed’s reactions critical for USD movements. Policies promoting growth or supply-side inflation could drive rate adjustments, adding to forex market volatility. As traders, we need to be prepared – we know Trump is a bit of a loose cannon, but we also need to adapt to changes in market structure and macroeconomics.


News and Risk Management


Taking all of this into account, we traders need to keep one eye on the news headlines, and one eye on the markets. Stay up-to-date with major news events and avoid trading within close proximity of them, reducing exposure on any open trades.

In the months ahead, expect volatility and surprises. Trump has never been more motivated in improving things for the United States. Given that the greenback is the most important currency to watch, we traders need to be prepared for anything that he throws at us. Traders need to embrace the volatility, identify trends, and keep an eye on the macro-economic influencers that ultimately drive the pricing of currencies.

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Market Analysis
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2024 Forex Market Insights

Read Time: 8 Minutes


Throughout the year of 2024, we’ve observed some significant economic shifts and global events that have influenced market movements in their own way. Central bank policies were front and centre, with the Federal Reserve, European Central Bank, and Bank of Japan steering market sentiment through interest rate decisions and inflation management.


Geopolitical events further intensified market volatility, from the U.S. presidential election to regional conflicts and global trade renegotiations. These developments highlighted the forex market's sensitivity to political transitions and international agreements – providing some great trading opportunities along the way, on the back of the resulting volatility.


There were talks of central bank digital currencies (CBDCs) and the integration of AI-driven trading tools, which brought us both opportunities and challenges, fundamentally altering how traders approach the market.


Economic indicators like inflation trends, employment data, and GDP growth provided critical insights into currency dynamics, while liquidity patterns and institutional trading flows shaped the forex market 2024 behaviour.


Table of Contents


Central Banks & Economic Indicators


Economic indicators continued to determine forex market 2024 movements. Inflation trends, employment data, and GDP growth became focus points for traders in their market analysis. However, central banks were the driving forces behind many of 2024’s forex movements. One of the key influencers being the Federal Reserve (FED), which continued to balance inflation management with economic growth. Its policy decisions caused notable fluctuations in the dollar index.


In Europe, the European Central Bank (ECB) adopted a measured approach, focusing on stabilising the eurozone whilst observing varying economic growth rates. Its quantitative easing measures influenced liquidity trends and regional currency movements.


Across the Atlantic, the Bank of England faced challenges as the UK’s post-Brexit economy dealt with a persistent level of inflation.


The Bank of Japan remained committed to ultra-loose monetary policies, maintaining pressure on the yen – of which was a prime contender in the carry-trade space. Meanwhile, several emerging economies grappled with inflationary spikes, prompting central banks in countries such as Brazil and India to tighten policies.


Inflation remained a dominant theme, with central banks in developed and emerging markets adjusting their policies to manage rising prices. The U.S. inflation rate, in particular, was a critical driver of Fed decisions, indirectly shaping the dollar's global standing.


Whilst the U.S. demonstrated moderate growth, China’s slower-than-expected recovery impacted commodity-linked currencies like AUD and CAD. In addition, trade balance data highlighted the fragile state of international trade, further complicating currency dynamics.



Geopolitical Influencers



One of the year's most impactful events was the U.S. presidential election, which drove volatility across global markets. Policy discussions on trade agreements and economic reforms led to fluctuations in the USD, particularly against currencies like the euro and yen. With President Donald Trump still in the process of taking office, we can expect to see further geopolitical developments and forex price movements as we head into 2025.


Regional conflicts and political transitions also applied pressure on currencies. A key one being the tensions in Eastern Europe which influenced the euro's trajectory, whilst political instability in the Middle East affected oil-exporting nations' currencies such as the Russian Ruble and Canadian Dollar. In addition to this, trade agreements, such as renegotiations between key Asia-Pacific economies, created ripple effects in commodity-linked currencies like the Australian and Canadian dollars.



Forex Market 2024 – Behaviour Analysis



The forex market 2024 exhibited unique behavioural trends, characterised by pronounced volatility and evolving liquidity patterns. Traders observed spikes in volatility following key central bank announcements and geopolitical events, which created both challenges and opportunities.


Liquidity trends shifted significantly, with institutional trading flows dominating high-volume trading periods. Cross-border capital movements also surged, driven by divergent economic recoveries among regions. For instance, the U.S. attracted significant foreign investment due to its relatively stable economic outlook, bolstering the dollar’s strength against other major currencies.


Technological advancements further influenced market behaviour. AI-driven trading platforms improved trade execution efficiency, while blockchain technology introduced greater transparency in cross-border transactions. The digital currency evolution has added another layer of complexity, as traders adapted to the increasing integration of CBDCs into mainstream markets.


These behavioural insights reveal the dynamic nature of the forex market in 2024, emphasising the need for traders to remain agile and leverage advanced tools for navigating this ever-changing landscape.



A Technical Recap


In addition to observing the fundamental influencers of 2024, we can put it all into context by observing the daily chart for the year.

 

DXY 


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EURUSD

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As expected, the US Dollar movements were inversely correlated with the EURUSD reaching a high of 1.12140 and a low of 1.03332. 



AUD & NZD 


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Our Aussie dollar has provided some fantastic trading opportunities this year – with range-bound strategies taking advantage of Q1 & Q2, before trend-following strategies amplified those returns with the increased volatility in Q3 & Q4, resulting in a high of 0.69424 for the year, and a low of 0.63482. 

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Across the ditch, the Kiwi Dollar has performed very similarly, with a high of 0.63788 and low of 0.57971. 



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GBP


The trend was your friend for the GBP this year – providing a long-term bullish trend, before reversing to a now-downward trend. A prior low for the year at 1.22996 was met with a resulting high of 1.34342 at the conclusion of the bullish trend. 




CHF & JPY

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Love it or hate it, the Swiss Franc was a trend traders’ dream this year, with a bullish trend providing a high of 0.92244, followed by a resulting down trend reaching a low of 0.83744.

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We all know the story with the Yen this year, including multiple instances of intervention by the BoJ. Whether you’re taking advantage of the carry trade, or simply riding the trend, we saw textbook trending reaching a high of 161.951 and a low of 139.579 for the year. 




Conclusion – Lessons From 2024


The 2024 forex market has been a year of developments, from central bank policies, economic indicators, geopolitical events, to technological advancements...


Disclaimer: Economic conditions are complex and rapidly evolving. This overview provides an educational perspective based on available information as of late 2024.


21/01/2025
Market Analysis
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Introducing Six New Base Currencies for Forex Traders

Estimated Read Time: 15 minutes 

In an era where global markets are constantly evolving, adaptability and innovation have become the cornerstones of success. With this ethos in mind, we are pleased to announce the introduction of six new base currencies by Fusion Markets. Embracing the diversity of international finance, we are now offering traders the opportunity to engage with the Norwegian Krone (NOK), Swedish krona (SEK), Czech koruna (CZK), Hungarian forint (HUF), Swiss franc (CHF), and Danish Krone (DKK) as base currencies. 


Key Points:  

  • Fusion Markets has added six new base currencies: Norwegian Krone (NOK), Swedish Krona (SEK), Czech Koruna (CZK), Hungarian Forint (HUF), Swiss Franc (CHF), and Danish Krone (DKK). 

  • These additions aim to provide traders with more flexibility and access to a broader range of currency pairs. 

  • Each currency has a unique history and plays a significant role in its respective country's economy. 

  • The new base currencies offer opportunities for portfolio diversification and exposure to different economic regions. 

  • Traders can benefit from Fusion Markets' low commissions, zero minimum deposit, and access to multiple trading platforms. 

  • Understanding the correlations between these currencies and major global currencies is crucial for effective trading strategies. 

  • The introduction of these base currencies reflects the evolving nature of the global forex market and the importance of adapting to new opportunities.



Table of Contents

This expansion marks a significant milestone in our commitment to empowering traders with enhanced flexibility and access to a broader range of currency pairs. As the forex landscape continues to evolve, it is essential for traders to have access to a comprehensive selection of base currencies to navigate the ever-changing trends of the global economy. Let's explore their history, unique characteristics, roles, and correlations within the global financial ecosystem.

By registering with Fusion Markets, you will get access to: 

  • $0 minimum deposit 

  • No minimum account size 

  • White glove customer support 

  • Range of markets (including Forex and our new base currencies) 

  • TradingView, MetaTrader 4, MetaTrader 5, cTrader 

 

TRADE NOW 


Norwegian Krone (NOK)


The Norwegian Krone, denoted by the symbol "kr" and the currency code NOK, has been in circulation since 1875 when Norway joined the Scandinavian Monetary Union. Like many currencies, the Krone is subdivided into smaller units, known as øre, with 100 øre equaling 1 Krone. While Norway initially pegged its currency to gold, it later adopted a floating exchange rate regime, allowing market forces to determine its value. 

 

Historical Background of the Norwegian Krone 


The initial introduction of the krone occurred in 1875 as it replaced the speciedaler. At that time, the exchange rate was set at four kroner for one speciedaler. Subsequently, Norway became a part of the Scandinavian Monetary Union, a coalition that remained in existence until the outbreak of World War I. Throughout the Union's existence, the Norwegian krone adhered to the gold standard until 1931 when it was pegged to the British pound. 


In 1939, Norway's currency was linked to the U.S. dollar (USD). However, during the German occupation of Norway in World War II, it was tied to the Reichsmark. Following the war's conclusion, the currency was once again pegged, this time to the British pound (GBP). Shortly afterward, the krone's peg shifted to the US dollar until 1971 when it was allowed to float freely in the market for seven years before being linked to a basket of currencies. Then, in 1992, the central bank opted to move away from a fixed exchange rate system, enabling the currency to float based on foreign exchange rates. 

 

Correlations of the NOK 


The Norwegian krone ranks as the 14th most traded currency globally by value and exhibits a strong correlation with other currencies. Its value against major counterparts such as the US dollar and euro experiences significant fluctuations from year to year, primarily influenced by shifts in interest rates and global oil prices. 


Even long after the dissolution of the Scandinavian Monetary Union, the Krone maintains a notable correlation with the Danish krone and the Swedish krona. Conversely, its correlation with currencies like the British pound, euro, Canadian dollar, and others tied to oil prices remains comparatively low. Notably, some establishments in Oslo, Norway’s capital city, accept payments in US dollars or euros for goods and services. 


As a prominent oil exporter in Western Europe, Norway derives a substantial portion of its budget from oil revenues. Consequently, the value of the krone is closely intertwined with fluctuations in crude oil prices, reflecting trends in the global oil market. 


For instance, during the oil crisis of 2015, the krone depreciated by 20% against the dollar, marking its lowest level in a five-month period from October 2014 to February 2015. To learn more about other top Forex events in the new millennium, visit our blog. 



Swedish Krona (SEK)


The Swedish krona, symbolised as "kr" or "SEK," serves as the national currency of Sweden. With a rich history established in 1873, replacing the Swedish riksdaler as Sweden joined the Scandinavian Monetary Union, the SEK is renowned for its resilience and stability. 


Sweden's export-oriented economy, characterised by industries such as automotive, engineering, and telecommunications, heavily influences the SEK's performance. Furthermore, the SEK's correlation with global economic trends and monetary policies makes it an attractive option for traders seeking exposure to the broader European market. 

 

Historical Background of the Swedish krona 

The origins of the Swedish krona can be traced back to the 17th century when Sweden transitioned from the silver standard to a bimetallic monetary system. Over the centuries, the krona evolved, experiencing fluctuations in value, and undergoing reforms to adapt to changing economic conditions. 


In 1873, Sweden joined the gold-standard-based Scandinavian Monetary Union, pegging the krona to gold. Subsequently, Sweden embraced a floating exchange rate regime, allowing the krona's value to be determined by market forces. 

 

Correlations of the SEK 


The Swedish krona (SEK) exhibits correlations with various currencies, with some of the notable ones including: 


  • Euro (EUR): Given the proximity and extensive trade relations between Sweden and the Eurozone countries, particularly Germany, the Swedish krona often shows a significant correlation with the euro. 

  • Norwegian krone (NOK): As neighbouring countries with intertwined economies, Sweden and Norway often experience correlated movements in their respective currencies, the Swedish krona, and the Norwegian krone. 

  • Danish krone (DKK): Similarly, Sweden's proximity to Denmark and their shared economic ties can result in correlations between the Swedish krona and the Danish krone. 

  • US Dollar (USD): The US dollar is a major global reserve currency and a key player in international financial markets, so movements in the USD can influence the Swedish krona's exchange rate. 

  • British Pound (GBP): While not as strong as some of the other correlations mentioned, the Swedish krona may also exhibit some level of correlation with the British pound, particularly due to trade relations and economic ties between Sweden and the United Kingdom. 

 



Czech Koruna (CZK)


The Czech koruna, represented by the symbol "Kč" or "CZK," is the official currency of the Czech Republic. Emerging as a key player in Central Europe's economic landscape, the CZK embodies the region's transition towards a dynamic market economy. 


With a focus on manufacturing, automotive, and technology sectors, the Czech Republic's export-driven economy shapes the CZK's performance. Traders eyeing opportunities in Eastern Europe will find the CZK a compelling addition to their forex portfolios. 

 

Historical Background of the Czech Koruna 


Since February 8, 1993, the Czech koruna has served as the official currency of the Czech Republic, replacing the Czechoslovak koruna following the dissolution of Soviet Czechoslovakia into independent Czech and Slovak republics. Both the Czech koruna and the Slovak koruna (SKK) were introduced at par value in lieu of the Czechoslovak koruna. 


Despite joining the EU in 2004, the Czech Republic has not yet adopted the euro (EUR) as its official currency. Nevertheless, the nation remains in preparations to transition to the common currency, albeit without an official target date for implementation. Originally, the Czech Republic aimed to adopt the euro in 2012, but opposition led to the postponement of this move following a 2007 vote. 

 

Correlations of the CZK

 

The Czech koruna (CZK) exhibits correlations with various currencies, with some of the notable ones including: 

 

  • Euro (EUR): Given the geographical proximity and economic ties between the Czech Republic and the Eurozone countries, particularly Germany, the Czech koruna often shows a significant correlation with the euro. 

  • US Dollar (USD): As one of the world's primary reserve currencies and a key player in global financial markets, movements in the US dollar often influence the Czech koruna's exchange rate. 

  • Polish złoty (PLN): Due to Poland's proximity to the Czech Republic and the significant trade relations between the two countries, there tends to be a correlation between the Czech koruna and the Polish złoty. 


Hungarian Forint (HUF)

  • The Hungarian forint, being another currency from a neighbouring country in Central Europe, may also exhibit correlation with the Czech koruna due to shared economic factors and trade relations. 

  • Slovak koruna (SKK): Historically, before Slovakia adopted the euro, the Slovak koruna maintained a correlation with the Czech koruna due to their shared history and close economic ties as part of the former Czechoslovakia. 

 

These correlations may vary over time and can be influenced by factors such as economic conditions, trade relations, geopolitical events, and monetary policies of respective countries. Traders and analysts often monitor these correlations to gain insights into potential trends and movements in the Czech koruna's exchange rate. 

 

The Czech Republic's Approach to the Euro 


Concerns stemming from the European debt crisis stand as a primary factor driving resistance to the Czech Republic's full integration into the Eurozone and the adoption of the euro as its official currency. While eventual euro adoption is anticipated for the Czech Republic, recent discourse has also entertained the notion of the nation's potential departure from the European Union altogether. 


Termed 'Czech-Out' or 'Czexit' by the media and some political analysts, this concept parallels Brexit, depicting a scenario where the Czech Republic exits the European Union entirely. Although Czech President Miloš Zeman does not endorse the idea of EU departure, he has expressed openness to holding a referendum, allowing citizens to vote on the matter, similar to the process undertaken by the U.K. in June 2016. 


Despite these discussions, the Czech Republic boasts a relatively robust economy within the EU. It exhibits one of the highest Gross Domestic Product (GDP) growth rates and among the lowest unemployment rates, standing at approximately 2.9% in 2019, with inflation hovering around 2.8%. While unemployment experienced a modest increase in 2020, it settled at 3.8% as of November 2020. 

 

Hungarian Forint (HUF):

 


The Hungarian forint, denoted by the symbol "Ft" or "HUF," stands as the official currency of Hungary. Rooted in a rich tapestry of history and culture, the HUF reflects Hungary's economic resilience and dynamism. As a prominent player in Central and Eastern Europe, Hungary's diverse economy encompasses industries such as automotive, manufacturing, and agriculture. The HUF's correlation with regional economic developments and monetary policies offers traders a gateway to the vibrant markets of Eastern Europe. 

 

Historical Background of the Hungarian Forint  

The Hungarian forint saw its initial usage between 1868 and 1892, but it wasn't until 1946 that the modern forint was officially introduced, with the aim of stabilising the national economy in the aftermath of World War II. The currency derives its name from the gold coins of Florence known as fiorino d'oro, minted from 1252 onwards and widely circulated throughout the Austro-Hungarian Empire. 

 

While the forint's exchange rate has displayed some level of stability, uncertainties within the nation's economy have adversely impacted its value in the foreign exchange market. For instance: 

 

  • The acceptance of the Treaty of Trianon in 1920 following World War I had profound repercussions on the Hungarian economy, marked by the loss of over 70% of its pre-war territory and more than 60% of its pre-war population. Five of Hungary's ten largest cities prior to World War I were absorbed by neighbouring countries. This, coupled with war reparations and the erosion of its tax base, led to a significant devaluation of the HUF, with annualised inflation peaking at nearly 1,200% in 1923. 

  • In the late 1980s and early 1990s, Hungary, along with several other central and Eastern European nations, transitioned away from communist rule, prompted by economic stagnation and inflation. The transition, though challenging, was peaceful. Hyperinflation soared to 35% during the 1990s as Hungary embraced a market economy. Although the economy showed signs of improvement in the 2000s, rampant inflation undermined the currency's convertibility. 

  • Hungary's export-oriented economy heavily relies on a skilled labour force. Key trading partners include Germany, Slovakia, Italy, Romania, and Austria. Notable industries encompass car manufacturing, production of car parts, and manufacturing components for radios and televisions. 

 

According to World Bank data, Hungary reported a -4.7% contraction in gross domestic product (GDP) in 2020 and a 5.1% inflation rate in 2021. This downturn primarily stemmed from the economic repercussions of the global COVID-19 pandemic. 

 

Correlations of the HUF 


The Hungarian forint (HUF) exhibits correlations with various currencies, including: 

 

  • Euro (EUR): Given Hungary's geographical proximity to the Eurozone and its extensive trade relations with Eurozone countries, particularly Germany, the Hungarian forint often shows a significant correlation with the euro. 

  • Polish złoty (PLN): Poland and Hungary have significant trade relations, but Poland does not share a direct border with Hungary. Therefore, the Hungarian forint may exhibit correlation with the Polish złoty. 

  • Czech koruna (CZK): Similar to Poland, the Czech Republic shares a border with Hungary, and there are considerable trade ties between the two countries, potentially leading to correlations between the Hungarian forint and the Czech koruna. 

  • Romanian leu (RON): Romania is another neighbouring country to Hungary, and while the economic ties may not be as extensive as with Poland or the Czech Republic, there can still be correlations between the Hungarian forint and the Romanian leu. 

  • US Dollar (USD): The US dollar is a major global reserve currency, and movements in the USD can influence the Hungarian forint's exchange rate, especially during times of global economic uncertainty. 

 



Swiss Franc (CHF)


The Swiss franc, symbolised as "CHF," holds a revered status as a safe-haven currency and a bastion of stability in the global financial landscape. Renowned for Switzerland's tradition of neutrality, fiscal prudence, and financial sophistication, the CHF embodies the quintessential attributes of a haven asset. Switzerland's thriving banking sector, precision engineering, and pharmaceutical industries underpin the CHF's allure as a currency of choice for investors seeking refuge during times of uncertainty. 

 

Historical background of the Swiss franc 


Until 1798, approximately 75 entities within Switzerland were engaged in coin minting activities, resulting in the circulation of 860 distinct types of currency featuring varying denominations, weights, and monetary systems. Among these currencies were thalers originating from cities such as Bern, Basel, Zurich, and Geneva. 


In 1798, the Helvetic Republic introduced a new monetary framework, anchored by the Berne thaler, equivalent to six grams and three-quarters of pure silver. This currency, known as the franc, remained in circulation until the dissolution of the Helvetic Republic in 1803 but continued to serve as the basis for currencies utilised by several member states of the Reformed Swiss Confederation. 


In 1848, with the adoption of the new Swiss Federal Constitution, the exclusive authority to issue currency within the country was granted to the federal government. The initial federal monetary legislation, enacted on May 7, 1850, by the Federal Assembly, established the franc as the official monetary unit of Switzerland. Concurrently, both the Swiss franc and the French franc were introduced into circulation. 


The establishment of the Latin Monetary Union between 1865 and the 1920s, comprising Switzerland, France, Belgium, and Italy, further intertwined the Swiss franc's value with those of its counterparts. Under this union, the currencies of all four nations were pegged to the value of silver. Additionally, the Swiss franc was incorporated into the Bretton Woods exchange rate system following World War II, a framework that persisted until the early 1970s. Notably, until 1999, the exchange rate of the Swiss franc was tied to the price of gold. 

 

Factors Influencing the Swiss Franc (CHF) 


  • Swiss National Bank and Monetary Policy 


The Swiss National Bank (SNB) serves as Switzerland's central bank, entrusted with the responsibility of formulating monetary policy and managing exchange rates. Unlike some central banks, the Swiss National Bank does rely on a specific policy rate, previously the Libor target range, to regulate monetary conditions. Previously, it utilised FX swaps and repurchase agreements to influence both the money supply and interest rates. To bolster liquidity, the Bank engages in purchasing US dollars (or other foreign currencies) against Swiss francs. SNB officials wield the ability to impact the Swiss franc through their statements and commentary concerning the currency, liquidity, and monetary matters. Any alterations in monetary policy have consequential effects on the currency. 


  • Macroeconomic Indicators 

A plethora of economic indicators relating to Switzerland's economy and market, including inflation, employment data, GDP rates, and industrial production, exert influence on the Swiss franc. 


  • Cross-Exchange Rates 

Fluctuations in non-dollar exchange rates or cross-exchange rates can influence the USD/CHF pairing. Fluctuations in non-dollar exchange rates or cross-exchange rates such as GBP/CHF may not have a significant or predictable impact on USD/CHF, due to the weaker correlation between the British pound and the Swiss franc. 


  • Positive Correlation with the Euro 

The Swiss franc exhibits a positive correlation with the euro, owing to the close economic ties between Switzerland and the Eurozone, particularly Germany. This correlation is notably apparent in the inverse relationship between the USD/CHF and EUR/USD pairs. When the EUR/USD experiences sharp movements upwards or downwards, the USD/CHF reacts correspondingly but inversely, consistently moving in the opposite direction. 

 


Danish Krone (DKK)


Danish Krone, represented by the symbol "kr" or "DKK," serves as the official currency of Denmark, Greenland, and the Faroe Islands. As a stalwart of Scandinavian prosperity and innovation, the DKK reflects Denmark's enviable track record of economic stability and social welfare. Denmark's diversified economy, encompassing industries such as renewable energy, shipping, and agriculture, shapes the DKK's performance. Moreover, Denmark's commitment to prudent fiscal policies and sound governance enhances the DKK's appeal as a reliable currency for international traders. 

 

Historical Background of the Danish Krone 

 

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The history of coin production and usage in Denmark spans numerous centuries, with organised minting activities dating back to as early as the 10th century. The earliest official Danish coins were established on the Carolingian silver standard, a system of silver currency introduced in France during the era of Charlemagne, aiming to replace the gold coinage of the Roman Empire. This silver-based monetary system, consisting of pennies, shillings, and pounds, eventually became the foundation for the British pound sterling in Great Britain. 


Regrettably, Danish monarchs, like many rulers of their time, pursued practices of periodically debasing their currency by reducing the actual silver content in minted coins, leading to multiple remonetisations in attempts to restore public trust in the nation's monetary system. One significant event in this regard was the inception of the current Danish krone in 1875. 


The introduction of the krone coincided with a period when transactions involving coins were becoming increasingly cumbersome, prompting a transition towards greater reliance on printed banknotes alongside the implementation of the new currency. 


Denmark made several endeavours to fix its currency to the gold standard, but ultimately abandoned this endeavour in 1931, coinciding with Great Britain's decision to depart from the gold standard in the same year. During Denmark's occupation by Germany in World War II, the Danish krone was temporarily linked to the German Reichsmark, followed by a peg to the British pound in the immediate postwar era. 


Presently, the krone is pegged to the euro under the European Exchange Rate Mechanism (ERM) II, a mechanism aimed at curbing excessive volatility in the euro's exchange rate with European trading partners. Over recent decades, Denmark has contemplated joining the eurozone and adopting the euro as its official currency. However, the most recent public referendum in 2000 narrowly rejected this proposition by a margin of 53% to 47%. 


 

The Danish Krone in Forex Trading 


The Danish Kroner (DKK) holds a distinctive position within the realm of Forex trading, presenting opportunities and perspectives that are indispensable for traders seeking success in navigating the global currency market. Serving as the official currency of a nation renowned for its stable economy, high living standards, and robust financial systems, the DKK serves as a conduit for comprehending the Scandinavian financial landscape. 


  • Stability and Security: 

Denmark's economic stability finds manifestation in its currency, rendering the DKK a preferred asset for traders seeking safe-haven investments amid periods of global economic uncertainty. The nation's strong fiscal policies, minimal inflation rate, and transparent governance contribute to the stability of the Kroner, instilling a sense of confidence in Forex traders. 


  • Diversification: 

Engaging in DKK trading enables investors to diversify their currency portfolios, spreading risk and accessing markets characterised by lower volatility. The DKK's correlation with major currencies like the Euro and the US Dollar equips traders with strategic alternatives, empowering them to make informed decisions aligned with global economic trends. 


  • Insight into the Scandinavian Market: 

Understanding the DKK is essential for traders interested in the Scandinavian region, as the currency serves as a bellwether for the area's economic well-being. It furnishes valuable insights into market dynamics, investment prospects, and potential risks prevalent in the region. 


  • Trading Strategies: 

Forex traders can leverage the stability and regional significance of the DKK to formulate tailored trading strategies. Whether engaging in carry trades, utilising the currency for hedging purposes, or capitalising on its low volatility for short-term gains, the DKK offers a spectrum of opportunities suitable for both novice and seasoned traders. 


 

Correlations of the DKK 


The Danish krone (DKK) exhibits correlations with various currencies, including: 

 

  • Euro (EUR): Given Denmark's proximity to the Eurozone and its extensive trade relations with Eurozone countries, particularly Germany, the Danish krone often shows a significant correlation with the euro. 

  • Swedish krona (SEK): Denmark shares a border with Sweden, and both countries have significant trade relations. Therefore, the Danish krone may exhibit correlation with the Swedish krona. 

  • Norwegian krone (NOK): Norway is another neighbouring country to Denmark, and while the economic ties may not be as extensive as with Sweden, there can still be correlations between the Danish krone and the Norwegian krone. 

  • British Pound (GBP): While there may be some level of correlation between the Danish krone and the British pound, the correlation is generally weak. The Danish krone is more heavily influenced by the Euro due to Denmark's ERM II peg. 

  • US Dollar (USD): The US dollar is a major global reserve currency, and movements in the USD can influence the Danish krone's exchange rate, especially during times of global economic uncertainty. 

 

Conclusion



In conclusion, the introduction of these six new base currencies underscores our dedication to providing traders with unparalleled opportunities to diversify their portfolios and capitalise on emerging market trends. Whether it's harnessing the resilience of the Norwegian Krone, navigating the intricacies of the Swiss franc's safe-haven status, or tapping into the dynamic economies of Central and Eastern Europe, our expanded offering opens doors to a world of possibilities in forex trading.  


For further insights into currency pairs and the foreign exchange market, register with Fusion Markets to stay updated on all the latest macroeconomic developments. 

 

 

 


12/11/2024
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