How the World Cup Can Affect Currency Trading

By Anton Eljwizat – The World Cup has begun and trading rooms the world over have caught football fever. If past experience repeats, trading activity may become more languid over the next few weeks, especially in the European markets, as traders focus on the matches and less on risk-taking. In essence, many people won’t be trading as much unless they’re forced to by news or price movements themselves.

Some analysts noticed that historically during the month of the World Cup volatility and volume take a holiday. In a few weeks, however, we may see some sharp movements as according to some traders the markets will reflect on the “slow economic data” of the current period.

The impact of the World Cup is not all fun and games. A study by Dartmouth’s Tuck School of Business indicated that the “mood” of a country is affected by a loss in the World Cup to such a degree that following the loss, the local spot market in that country declines. On average, stock indices and CFD markets decline around 0.40% after the national team loses in a World Cup game. However, the same study concluded that there is a lack of evidence showing that stock indices rise when a team wins.
It’s also possible that some traders’ eyes are glued to the TV during important games, decreasing trading volumes.

Meanwhile, the South African rand has continued to gain on international currencies. The World Cup has become more expensive for foreign visitors. The South African rand has not been this strong since before 1994.

Forex Market Analysis provided by Forex Yard.

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.