Forex markets haven’t been performing as well as traders would like them to. Over the course of the last four months or so, the markets have been experiencing low volatility, and this has affected the profits traders make off the market.
The low profits on the markets also extended to bond yields and equity markets. Bond yields fell due to high demand for them as investors decided to move their funds into the safe-haven assets. The trade war between the United States and China has raised concerns on the markets, and investors are holding onto their funds as they wait to see how the trade wars will be resolved.
Financial bodies in the United States and Europe are considering placing measures to support the markets. The United States is expected to cut back interest rates, and the European Central Bank (ECB) is mulling over a possible return to policy stimulus. These possibilities of these measures have caused a drop in yields and rates, which has trickled to the exchange rates.
Earlier in the year, Norway’s central bank was going against the grain, and it was giving its clients increasing rates. However, the central bank has aligned with the current trend on the markets as they are now keeping rates on hold, and this has fueled some pessimism over the state of the market.
Trade wars spur forex markets into action
After the last dialogue between the governments of the United States and China, the renminbi (RMB) tumbled past 7 to the dollar, and this sparked the forex market into action. Traders began selling the currency as fears that it might continue to fall mounted.
Other emerging currencies in Asia were also affected by the RMB’s fall against the dollar as the sell-off was extended to these currencies. Traders moved to buy perceived safe-haven currencies such as the Japanese Yen and the Swiss franc to protect their funds.
Other activity giving life to forex markets
The political situation in Argentina has affected the county’s peso, which fell so hard it forced the country’s finance minister to resign. Athanasios Vamvakidis, a strategist at the Bank of America, said that there are expectations that the market will deliver high volatility as a result of the Argentine peso tanking.
The verdict
Traders will be hoping that the current volatility, as little as it may be, will snowball into higher volatility across the entire market. A number of political situations have to be sorted out before the markets can return to normalcy.