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The ongoing set of political changes in the Middle East have taken another turn as the Egyptian military has given President Morsi forty-eight hours to successfully deal with the current crisis. Hundreds of thousands of protesters turned out for largely peaceful protests on Sunday, June 30. The nation has come to a political impasse. What will happen? Only the Egyptian military knows. Our concern is the Forex response to a military takeover in Egypt. The short term Forex response to a military takeover in Egypt will likely be positive. That would not have been the case some months ago if the military had stepped in to replace a democratically elected government. However, the Islamic based government of Mr. Morsi was elected by a thin margin and insists on governing as though it had received a huge mandate at the polls. Considering the chaos into which Egypt has fallen, the Forex response to military takeover in Egypt will likely be a huge sigh of relief.
Major versus Minor Currencies and the Crisis in Egypt
The fundamental analysis of Forex pairs hinges on trade balances, employment numbers, political stability or the lack of it, and stability of the regime in charge. Egypt is doing poorly on all counts. In trading currencies one needs to compare the prospects of one currency against another. The values of minor currencies of the Middle East will reflect the threat of continuing chaos in Egypt as well as the nearby civil war in Syria, about which we write in Forex and an Expanded War in Syria. On the other hand the United States economy is improving, interest rates are going up, and the dollar is climbing against other currencies. China on the other hand is still flirting with a real estate and banking crisis. Nevertheless, the degree of promise or threat to these major currencies, or the Yen, Euro, British Pound, Australian dollar, or Canadian dollar is substantially less than that to the Egyptian currency. In short, it will be less complicated if you trade the Egyptian pound against one of the major currencies instead of against another currency volatile currency from the Middle East.