These challenges began in earnest following the great recession in 2008, with a raft of regulatory issues and an increasingly volatile global economy contributing to a harsh and austere climate for investors.
Strangely, the coronavirus outbreak has delivered a sustained boost to the forex market, but can this be sustained as the global economy inches towards a genuine recovery?
How has the Forex Market Fared During the Covid-19 Outbreak?
The socio-economic chaos caused by Covid-19 has been characterised by rising unemployment and a dramatic decline in the global GDP, the latter of which has shrunk by 3% so far in 2020 and is projected to contract by up to $9 trillion over the course of the next two years.
However, the pandemic has also created opportunity across a number of industries and financial markets, with the foreign exchange offering a relevant case in point.
More specifically, the coronavirus pandemic appears to have temporarily reversed a trend for reduced volatility and trading volumes in the forex market, which followed a relatively staid and gradual economic recovery in the wake of the great recession.
In this respect, the ongoing uncertainty and volatility triggered by Covid-19 has encouraged a raft of new investors to target the forex market, many of whom may have previously sought out more secure stores of wealth through stocks and bonds.
This influx of new investors has further increased the market’s levels of volatility, creating a cycle of boom and growth that has fundamentally altered the outlook for the marketplace.
This is borne out by a number of metrics, including the number of online searches for ‘forex trading’ as reported by Google Trends. This highlighted that interest in trading piqued during the peak of the global pandemic in April and Q2, before falling incrementally during Q3 as the world’s economies began to embark on a recovery.
What’s the Future Outlook for the Forex Market?
While this may point to a future decline in forex trading volumes and volatility and 2020 draws to a close, the ongoing uncertainty may actually be about to ramp up thanks to a number of socio-economic and geopolitical issues.
Aside from the sustained impact of Covid-19 and associated lockdown measures as further coronavirus spikes are reported across the globe, the increased proposts of a ‘no deal Brexit’ are also continuing to weigh heavily on major currencies such as the GBP and the Euro.
Similarly, the likelihood of a $2.2 trillion stimulus package being rolled out in the US is further undermining the sense of stability in the forex market, while the upcoming North American election also has the markets speculating wildly (despite a seemingly insurmountable lead for Democrat candidate Joe Biden).
As a result of this, an entire basket of major currencies are likely to fluctuate throughout Q4 and beyond, with the USD, GBP and the Euro particularly impacted.
This will be music to the ears of speculators, day traders and investors with a keen appetite for risk, as they can continue to capitalise on a volatile market and leverage global events and the economic calendar to their advantage.