Bitcoin price today: steady near $87k after soft US CPI data, set for weekly loss
It is intuitive to assume that uncertainty and the negative economic impact derived from terrorism devalues a domestic currency immediately after an attack. Looking at recent examples of terrorism in western countries, we investigate if there is truth to this hypothesis.
In the latest attack in London, three men drove a van into pedestrians on London Bridge. Wielding knives, the men then left the van and went to the nearby Borough Market, where they stabbed people in and around restaurants and pubs. This tragic attack that occurred over the weekend left seven people dead and 48 injured.
Effect on the local currency:
As markets open on Monday, the GBP/USD gaps 15 pips to the downside while the EUR/GBP rises by a similar amount.
On May 22 in Manchester, a suicide bomber attacks Ariana Grande's pop concert with audience of up to 20,000. Authorities promptly raise the terror threat level to "Critical" fearing another attack. Authorities in England and Libya arrest numerous suspects, including the brother of the bomber who affirms their affiliation with ISIS-Libya. This act of terrorism left 22 dead and 129 injured.
Effect on the local currency:
GBP/USD drops to a low of 1.29524 (about 40 pips) as the severity of the attack is realized. The average high of the previous 200 five-minute moving average was about 1.299 indicating mild GBP volatility. The EUR/GBP rose to 0.8673, however the impact is indiscernible as the trend was clearly up anyway.
Last year on the 22nd December, Islamic terrorism strikes Europe again as it witnesses a Berlin attack during which a truck was driven into the Christmas market next to the Kaiser Wilhelm Church at Breitscheidplatz. It left 12 people dead and 56 others injured.
Effect on the local Currency:
Little or no impact during a period of pre-holiday, low volume trading. The EUR actually moves up over the next 24 hours.
On November 28th, 2016 the Ohio State University attack occurred. 11 people were hospitalized for injuries after a car ramming attack and mass stabbing occurred on university grounds. The perpetrator, Abdul Razak Ali Artan, was a Muslim Somali refugee and legal permanent resident of the United States.
Effect on the local Currency:
No discernible impact. The EUR/USD pair had been ranging between 1.066 and 1.052 and continued to do so until the 4th of December.
Conclusion:
From this small sample, we can say (perhaps counterintuitively for some) that terrorism has little immediate impact upon currency markets though a small amount of volatility may be expected. A more detailed study could specify the longer-term impact of ongoing terrorist activity, however from this study it appears that that money markets almost completely ignore the event and remain focused on the bigger picture. The caveat is that recent terrorism in western countries has resulted in only limited casualties. A serious terrorist attack that leaves thousands of dead may cause havoc to markets - such as the scale of the 9/11 attack.