Demand for FX is decreasing worldwide, and here is why
Forex is one of the biggest markets in the world which has been popular globally over the past decades. While the global tendency is constantly changing due to some major political and economic movements, certain markets increase or decrease in demand relatively. One of the recent cases is observed in the FX industry as well, which has seen a vivid decline in numbers for the past several weeks.
The reports have also proved the decline and decrease of interest in the FX industry. Recently, Saxo Bank Group published its monthly report, where the claims can be verified, through the numbers. The reports show the activity log for the October month, showing the major decrease across all markets, for which the Saxo Bank offers the services.
Critical line in the market
According to experts, the major changes in the market are determined by the current extremely hard and critical global situation, which is tightly connected to the global pandemic and economic crisis. The pandemic has caused lockdowns in almost every country, while businesses had to shut down or cut off the staff, leaving millions of people unemployed.
The global picture had left its footprint in the markets, viewing the risks associated with trading in general. The second wave has covered us once again, with the ever-increasing number of infected patients. The numbers are terrifying leaving many traders and investors reluctant for further investments and purchases.
The global economic crisis has already affected the FX industry, leaving many traders out of the activity area. The brokerage firms have slowed down in processing, due to the understaffed circumstances, which leads many traders to switch to the more swift processing process, which is ECN brokers. The main difference between ECN and regular accounts is that people are looking for a faster alternative for border processing, which is offered by the ECN brokers. This is especially handy, during currency fluctuation and the short-term trading strategy.
Some of the major factors that impact market demand are currency pair correlations, interest rate risks, central bank decisions, and inflation risks. You would have noticed that the keyword in all of the above mentioned is the risk. If the risks are too high for the traders, they simply quit the market or wait for stability in the market.
The socio-economic crisis has contributed to rapid inflation, which is one of the biggest problems for most countries. The inflation risk is very high currently, thus trading with the currency pairs is the least safe. Because of the uncertainty of the further steps, Central Banks are working on stabilizing the situation, making decisions of selling a lot of foreign currency in an attempt to somehow suppress the inflation process.
The strategy of some countries includes lowering the interest rates, in order to give people the ability to invest. Because of the increased number of unsecured loans, banks have to adjust their approaches. The increased number of unemployed people determined the number of unsecured loans, which is mostly about the private sector, also the main target for the forex market.
Everything this might have a slightly long-term positive impact as well. People who are left unemployed and locked down in their houses because of the pandemic still have to earn money somehow. It might be the window of opportunities for new traders, who have just started trading. Before you start trading with the broker, make sure that the broker is licensed and has the best offer for you. During the current situation, it is better to find a medium-sized broker, with the minimum available deposits, who are licensed and offer different instruments for trading. Brokers like Axiory can be a perfect choice, with very low minimum deposits, and even deposit bonuses.
The Saxo Bank report
The demand for the equities on Saxo further slumped significantly last month with only $104 billion in assets changing hands, a decline of almost 16% month to month. The trading volume with commodities and fixed income instruments also saw a significant slump by over 23 percent. To be precise, October’s volume for commodities came almost $31 billion and fixed income at almost $5 billion.
The major decline is the global tendency and not only the forex market is the one to suffer. According to the previously mentioned report, the total trading volume for the month went down to $254.2 billion. This indicates a decline of 16.3 percent from the previous month, which was slightly over $303 billion. The daily average volume for the month also went down to $11.6 billion, while a month ago, we could still observe the number at 13.8 percent.
The FX volumes for the last month also came at less than $115 billion, which is almost $20 billion lower than the September report. This shows a month-to-month decline of almost 15%. While this is only about the monthly reports, we can already clearly see the year-on-year demand, which is poorly led by the current October FX trading volume, which indicated over $141.2 billion last year.
One way or another, we can clearly see the massive decline in the forex market as well as in the stock market. Some major changes globally as well as politically have determined the changes, which are not seen to be going to the finish line yet. While the global pandemic has caused the global crisis, people shall find the way out, and who knows maybe this global economic collapse brings up a new forex industry millionaire.