Does Valentine’s Day Affect the Forex Markets?

Whoever said that the best things in life are free obviously hasn’t heard of Valentine’s Day! With people all over the world increasing their spend on gifts in the days leading up to the day of love, not only do prices of roses, chocolates and other popular items rise but currency valuations of producer economies also receive a boost. This impact on the financial markets has been termed the “Valentine’s Effect.” Don’t miss out on market moves that result from this effect. Check out these insights to refine your FX trading strategy for the month of love.

Love or Hate, You Can’t Ignore the Greenback

While the US imports chocolates, décor items, and apparel to meet the increased demand in the lead-up to Valentine’s Day, flowers form a major share of the imports. According to the US Census Bureau, the country imported $203 million worth of flowers in February 2022. As people normalise Valentine’s spending for not just their someone special but all loved ones, the National Retail Federation expects V-Day spending to reach a record high of $14.2 billion in 2024.

Since the USD is the dominant currency for not only trade but also international finance, forex traders need to keep an eye on its performance. Among the top things to know about trading forex currency pairs is that imports exert downward pressure on a currency. And the slightest dip in the greenback translates into multiple opportunities in the forex market.

Popular advice among forex traders is to love the market but not your trades. Intraday forex traders set up alerts for when the pip value calculator identifies an opportunity. For this, you can add indicators to your MT5 or MT4 terminals to notify you in time to move in and out of positions quickly.

Chocolates and Candy: Sweetening the Occasion for the Pound

Since flower prices can spike anywhere from 200% to 500% or even more on V-Day, candy and chocolates present affordable gifting items as well as treats for self-indulgence. A close second are baked goods, including cakes and cookies. So much so that the UK’s economy has great hopes for the day. Due to Free Trade Agreements, the British economy was expected to receive a boost of £2.3 billion and £800 million from Australia and New Zealand, respectively, in 2023. Coming just in time for Valentine’s Day, it opened massive export opportunities for the country’s confectionery companies. With more reasons to rejoice, top-notch confectioners in the UK upped their production to meet export demand. In 2024 and the years ahead, the benefits of border controls slowly being lifted will ease trade within Europe as well. And the more the exports, the greater strength of the pound sterling.

Romantic Getaways: Helping the Bahamian Dollar

Holiday destinations like the Bahamas experience a spike in tourism in the month of love. In February 2023, total arrivals in the country rose to pre-pandemic levels of 0.8 million, with about 0.7 million occurring via sea. The tourism-dependent economy gets a considerable boost with increased demand for cruising and water sports, which can potentially lift the currency.

Fragrance of Love: Pushing the Indian Rupee

Gifting flowers is among the most popular Valentine’s trends worldwide. This creates a massive opportunity for the floriculture industry. Indian rose exporters consider V-Day among highest demand periods of the year. Exporters from Karnataka, the largest producer of roses in India, saw 30% higher demand for Valentine’s Day 2023. The Indian “Sunrise Sector” is projected to reach _472 billion in 2024, which would lend support to the rapidly developing economy. 

More to Look at For Traders

Being a global celebration, Valentine’s Day impacts the forex market. However, while learning how to trade forex, a key lesson is to always have an economic calendar handy. Currency-pair movements are affected by economic updates, corporate earnings reports, and, of course, geopolitical events. Therefore, FX traders can set up alerts for upcoming FX events during the Valentine’s month. For instance, in 2024, the Fed Governor and ECB council members will address their respective audiences on February 13. With speculations of interest rate cuts, these could give valuable insights and impact trader sentiment.

On Valentine’s Day, the Eurozone’s Q4 GDP, UK’s unemployment levels for December, and the January CPI of the US will be announced. These data releases could also move the currency markets. So, make sure you show some love to your trading portfolio this February.

To Sum Up

• High consumer demand exerts pressure on the USD on V-Day.
• British confectionery exports lend support to the pound sterling.
• The Indian Rupee blossoms with the increased demand for Indian roses.
• Travel destinations get a boost during V-day, helping their currencies.
• FX traders must continue to observe economic events and news updates to make informed trading decisions.

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