Can Famous Tweets Really Affect the Forex Market?

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Since its inception in 2006, Twitter has revolutionised the way people interact with one another. It is amazing to see how a micro-blog of only 140 characters can stir not just people but the global financial markets. Twitter is now increasingly used in forex trading to get instant access to market information, expert opinions and trading tips.

Usually, people tweet news, share opinions, promote their stuff or themselves, or simply provide inputs on the debated issues of that day. However, when the 45th President of the United States, Donald J. Trump, uses Twitter to address the public on a variety of topics, the tweets obviously make news.

As the President of the United States of America (POTUS), inheriting @POTUS on Twitter, Trump is indeed the most influential tycoon in the Twittersphere. Famous for his unpredictable, personal, aggressive and, many a time, bizarre and insulting tweets, Trump has hardly left any area where he has not generated a Twitter controversy.

Sometimes, his tweets can be quite hilarious:

tweets Donald Trump

And, at worst, they can scare the hell out of the reader:

forex market donald trump

In the five minutes following this tweet, Toyota stock saw immediate devaluation and lost 1.2 billion in market cap. In fact, Toyota’s stock lost over 5%, equivalent to around US$12 billion, in a span of six months following the tweet.

Forex traders are undergoing a dilemma regarding whether Trump’s presence on Twitter can be dangerous for the markets. Over the last decade, the community of financial traders has grown massively on Twitter, including many successful professional traders. Their aim is mostly to engage the public daily with the latest happenings and news of the market.

For new traders, tweets offer an amazing opportunity for both newbies and seasoned veterans to gain useful insights from experienced traders regarding how they can best approach the market.

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Impact of Trump’s Twitter Feed on Currency Exchange Rates

The domestic economic health and growth rate as well as its monetary policies, are some of the parametres on which the valuation of a country’s currency depends.

No doubt, a tweet coming from the POTUS related to a change in economic and diplomatic relationships between some countries and the US will have significant and widespread impact on the value of the US dollar, as well as the currencies of the concerned nations.

Twitter has emerged as a channel through which these statements are released, evoking an immediate and notable reaction in the market. It happened in 2016, when the US economic relationship and business associations with Mexico was a noteworthy theme in the US presidential elections. Donald Trump’s activities on Twitter during the elections, especially his stance on Mexico, severely affected currency valuation of the Mexican peso.

A similar dramatic impact was seen in January 2017, in terms of volatility and valuation of the domestic currency as the USD/MXN traded down 2%, when Trump tweeted, “General Motors is sending Mexican made model of Chevy Cruze to US car dealers-tax free across border. Make in USA or pay big border tax!”

Needless to say, tweets by Trump and other notable personalities can bring in short term volatility and fluctuations in international currencies and corporate equities throughout the world. It is important for investors and traders to remain aware of how individual tweets can affect sensitive financial products and to keep an eye on other relevant sources of news.

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