With the COVID-19 pandemic disrupting global economies, even the shape of foreign exchange trading has undergone serious transformations. Foreign exchange, or Forex, is the world’s largest financial market with currently around 2.4 quadrillion U.S. dollars in daily activity, where global currencies are traded by the second.
Naturally, the Forex market depends on international trade between nations. The pandemic has caused a great deal of economic uncertainty, disruptions in trade, and heightened isolationism. Every country’s response to the health crisis will directly affect their domestic economies. And this, in turn, will cause significant ripple effects in the financial world.
Impact of COVID-19 on Forex Market
As the governments worldwide imposed near-total lockdowns to combat the virus, online businesses and brokers gained importance for keeping economies afloat. And as the prices of oil, gold, and stocks fluctuated regularly, uncertainty has never loomed larger, posing risks but also presenting prospective rewards. Hence, this has led to an intensification of interest in COVID-19 and Forex trading relationships.
Although financial markets and industries generally are on the verge of collapse, the Forex industry has been considerably thriving. Top Forex brokers have globally registered a spurt in monthly trading volumes and new client accounts. This could be because of investors moving away from traditional stock trading, finding new income sources, or perhaps people taking to trading themselves. The ongoing pandemic catalysed the gradually rising popularity of Forex trading. Processes like these might serve as an explanation, why Forex brokers like OctaFX experienced a threefold rise in new clients last year.
Outlook for Forex in 2021
As COVID-19 continues to ravage economies worldwide, traders are on the lookout for new markets and opportunities. Though the volatility is bound to decrease at some point, for now, the exchange rates will continue being reactive to shocks, in turn increasing both the risks of Forex trading and the possible opportunities.
Certain patterns visible in 2020 will likely continue into 2021 as well. The pandemic will be a major consideration in the new year too, creating volatility with regard to control of the coronavirus. Nonetheless, policymakers are proactively discussing growth and inflation to reduce public debt burdens. The biggest takeaway from the past year has been not to take risks. OctaFX leading analysts advise to look at graphs displaying fluctuations of a chosen currency. This will give an idea as to why they lost value. Markets are far too volatile to bet on pairings that are too unpredictable. Industry professionals and investors will rely on safe-haven currencies that have remained significantly profitable even during the current disruption going forward.
The pressure remains high on the U.S. dollar, and it’s expected to fall by about 5–10% more but not to the levels of 2008, as President Joe Biden will return to a rules-based international order with a balanced global growth. The Australian dollar ended the year pretty strong and is safe, owing to local interest rates, which will be low in most developed countries.
The U.K. pound will continue to face pressure due to the rigid lockdown measures imposed to contain the new variant of coronavirus and subsequent slow recovery rates. Despite suffering from a second wave of coronavirus, the Canadian dollar still might have a favourable run in the new year as the situation stabilised to a large extent in December. The COVID-19 pandemic proved supportive for the euro as traders turned their attention to the problems of the U.S. dollar. Hence, the euro is expected to rise higher.
A new generation of traders
Another trend that is likely to grow in the new year is individual investments. The worldwide health crisis has led to the growth of self-employed remote workers. Forex trading is not an exception to this trend. Likely, the reliance on commercial or investment banks to trade on behalf of their clients will reduce and people will take to trading themselves. These self-reliant trading professionals will learn main aspects of Forex trading on the internet. Armed with this knowledge, they’ll operate in the market. It is also anticipated that established fintech firms will target Gen-Z and Millennials interested in getting into Forex trading. This demographic is familiar with tech advancements and investment opportunities available online, and they are more than willing to invest in Forex and earn Forex deposit bonuses.
Currently, there are several trading apps helping amateurs to begin with Forex trading, during these extreme sensitive market cycles. These apps are one of the many trends expected to grow in 2021, since it’s common wisdom by now to keep mobile trading services close at hand at any time. They shall lend support to new traders, especially, to follow one trading strategy without risking more capital than necessary. App developers may also provide online courses to teach about finance and trading, which OctaFX has done extensively throughout the last year. For these purposes the development team of OctaFX added to the full-scale web service trading app, which combines features of an account management system and a trading platform.
Even cloud-based Forex trading platforms will become highly popular amidst the new normal. They offer lesser costs, more flexible design, high reliability, and very low latency that is ideal for a constantly evolving market in terms of regulation, specific products and actual market conditions.
One can’t precisely predict the Forex market of 2021 as anything could happen. Perhaps there could be an even worse fall in the economies due to resurgence of coronavirus, decimating the currencies. But we are not entirely in the dark, as 2020 has taught us to expect the worst and be prepared for it. Therefore, some predictions can still be made about what will happen by tracking the ongoing developments. And this will prepare investors for the potential outcomes. Even political and border developments will influence the current values of different currencies.