The World Cup starts on the 12th June running until the 13th July, being hosted by Brazil, South America. The global scale of the sport means that there are significant amounts of money invested into advertising, hospitality, sponsorship and infrastructure.
Is there a correlation between the fortunes of a football team in the tournament and a nation's currency? Well in short, no, there isn’t a direct link over the long term, but the tournament does have an impact on the markets.
The host countries benefits from an inflow of investment in the years prior to the tournament, improving infrastructure, hotels and leisure all attempting to benefit from the tournament. The prestige of hosting the World Cup should also have a lasting impact on tourism, as the countries splendours are publicised to the world in wall-to-wall coverage. This benefit should be a long-term significance, with specialist tourism as an exotic destination for the globes holidaymakers.
The Brazilian economy is the 7th largest in the world, and the largest in Latin America, with large natural resources that has been hammered by corruption, drug smuggling, poor infrastructure, high tax, trade protectionism and bureaucracy. Abshire-Smith is currently unable to offer Brazilian Real (BRL) trading as the currency isn’t freely traded.
Source: Danske World Cup Special
There should be an uptick in countries sales prior and during the tournament of electrical goods (primarily TV’s), food, alcohol and weather dependent; BBQ paraphernalia. If a country does well in the tournament the play more games, which should lead to an uptick in the sales during that period. During the South African World Cup in 2000, games were played during the day, with many London traders taking time away from their desk to watch the matches reducing volumes.
(Due to the time difference the games will be outside of London trading hours, however this tournament will be during New York's trading hours, but the sport is less popular their, limiting the impact on trading volumes).
A good run in the tournament could just be the thing that the economies of southern Europe need. A united public behind the national team, could help the PIGS that are struggling to exit the financial crisis, with high unemployment and social unrest.
The host nation is usually tipped as a firm favourite, with other countries from the continent expected to be in the running. Only one team from outside of the host nation’s continent has ever won the World Cup, and that was this year’s host, Brazil. The country will be an unfamiliar one for many of the teams, with the climate likely to impact many of the visitors. According to a Goldman Sachs report the winning nation, does outpeform the rest of the globe in the weeks following the tournament, however this isn't a sustained boost. The full Goldman Sachs report which can be found here.